Auditing Anchor Complete Course Policy on Collaboration and Individual Work Solution
Auditing
Course Policy on Collaboration and Individual Work
This is an individual assignment and you are not to seek help from anyone else other than me.
I have engineered the test around the text and so you should not need to do any outside research. However, this is hard to prohibit. Thus, if you use any outside sources, cite them to avoid a charge of plagiarism. By cite, I mean be clear about exactly what material you took from what source and don't just include a "Works Cited" section at the end of the test. This is inadequate. Also, if you copy exact words from an outside source, make sure you put them in quotation marks as well as including a citation.
Questions
Assume that you are the partner in charge of the PRQ audit engagement. Explain all the modifications you would make to your audit report on internal controls and explain why you recommend the changes, if any. If you don't recommend any changes, explain why not.
Describe what actions you would need to take, if any, based on each of the three events. Be complete and describe any changes you would require in HIJ's financial statements for 2013, your audit report for 2013, and any additional actions, if any, required by GAAS. Also, justify your selections by stating why you would take them based on the type of each event.
Make sure you answers are sufficiently detailed to be clear about how the error violated the assertion and how each internal control or testing procedure would detect the error. Assume in all cases that the Cash Management function in the Treasurer's office of the firm involved prepares monthly bank reconciliations.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of XYZ, Inc.:
We have audited management's assessment, included in the accompanying Management's Report, on Internal Control over Financial Reporting, that XYZ, Inc. has not maintained effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria). XYZ's management is responsible for assessing the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the company's internal control over financial reporting based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditor obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Two material weaknesses were identified in the design and operation of internal controls over the accounting for sales commissions and separation of duties related to purchases of inventory. Given the nature of the transactions and processes involved and the potential for a misstatement to occur as a result of the internal control deficiencies existing on December 31,2014, we have concluded that there is more than a remote likelihood that a material misstatement in the annual or interim financial statements would not have been prevented or detected by internal controls.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2014 financial statements.
In addition to the materiel weaknesses noted above, we identified several deficiencies in internal control over financial reporting that we deemed to be less significant than a material weakness. These deficiencies have been separately communicated to XYZ's management.
In our opinion, because XYZ has not maintained an effective internal control over financial reporting, we are unable to evaluate management's assessment that XYZ did not maintain effective internal control over financial reporting as of December 31, 2014. Also in our opinion, because of the effect of the material weaknesses described above on the achievement of the 'objectives of the control criteria, XYZ has not maintained. in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) the balance sheets of XYZ as of December 31,2014 and 2011, and related statements of income, shareholders' equity, and cash flow for each of the three years in the period ended December 31, 2014.
Sullivan and Peters, CPAs.
December 31, 2014
Auditing Anchor Complete Course Policy on Collaboration and Individual Work Solution
Five main deficiencies were identified during the audit process in the company. The deficiencies describe the situations that do not allow the management or employees to perform their assigned functions, to prevent or detect misstatements. The first deficiency is that the management report on internal control over financial reporting was not prepared and maintained based on the internal control frameworks. This affects the validity and credibility of the audit reports considering that it may be questionable and its reliability. It is important that the internal controls should comply with the already set regulations and rules. Secondly, the XYZ Company had not maintained an effective internal control over financial reporting. This made difficult for the company to evaluate the management’s prog...
A+ - Thank you!
Thanks for the positive feedback!