Knapp Case 1.9- ZZZZ Best Company, Inc.
1. A review consists of an auditor performing analytical procedures and inquiries to provide a reasonable basis for obtaining limited assurance. In a review, the auditor does not give an opinion on the financial statements. He/she merely looks over the statements for any material misstatements or modifications that need to be made. Contrarily, in terms of the level of assurance, during an audit an auditor obtains a high level of assurance, expresses an opinion on accuracy and level of assurance, and tests for misstatements and the client’s internal controls. 2. The occurrence assertion is very important, especially in this case, to ensure that the financial statements of a company faithfully represent actual transactions, assets, and liabilities of the company. There were certain limitations of the evidence gathered by the procedures performed in the ZZZZ Best case with regard to the assertion of occurrence: a. Confirmations- The information obtained through George Greenspan’s confirmation seems invaluable to me based on the fact that the confirmation was only sent to Tom Padgett, especially since Tom Padgett was paid by Minkow to confirm contracts. Even though there was no way for Mr. Greenspan to know that Mr. Padgett was being paid off, I believe that he should have found more valuable information through his confirmations by sending them out to more than one person involved in the company. b. Analytical Procedures- According to the case, the analytical procedures Mr. Greenspan performed included: comparing ZZZZ Best’s key financial ratios with industry norms and inspecting key documents pertaining to the jobs contracted. Assuming that these are the only two procedures performed prior to audit planning, I do not think that there were enough analytical procedures performed to identify potential problem areas. There are five steps to be performed when completing analytical procedures: 1. Develop an expectation, 2....
Please join StudyMode to read the full document