Question 3
The Generally Accepted Auditing Standards which have been violated include:
The General Standard which states that the audit should be conducted by a person having adequate training, with due care and an objective state of mind. It is evident that due care was not adhered to. Due care means that the auditor is a professional responsible for fulfilling his/her duties diligently and carefullly. Since Donald did not review any of the controls of the company and only focused on the G/L and summarizing data that allready supported the financial statements, he may have missed material errors that the audited company had made.
The Examination Standard
i) Auditor should plan and perform the audit to reduce audit risk to a low level, they should also plan the nature, timing, extent of direction and supervision of team members. Here Donald simply used 2 co-op students to perform the audit in a short period of time. It is clear that enough guideance and direction was given as the audited financial statements did not have supporting notes.
ii) The auditor should obtain an understanding of the entity including internal controls in order to indentiy the risk of material misstatement. It is clear that this was not done as the time span for completing the audit was only 2 weeks. Donald did not review any of the internal controls of the company and only focused on the mathematical accuracy of the financial statements.
The Reporting Standard
iv) Indicate whether the financial statemnts present fairly in accordance with disclosed basis of accounting. Since this audit was performed in order for the company to receieve a loan, Canadian GAAP should have been adhered to. The auditor report that Donald made did not refer to any of the GAAP principl ...