Ch 2 Accounting Problems

Solutions to Problems

2-24

Brief Description of Generally Accepted Auditing Standards | Sally Jones' Actions Resulting in Failure to Comply with Generally Accepted Auditing Standards |

General Standards: 1. The auditor must have adequate technical training and proficiency to perform the audit. | 1. It was inappropriate for Jones to hire the two students to conduct the audit. The examination must be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the examination as long as there is proper supervision and review. |

2. The auditor must maintain independence in mental attitude in all matters relating to the audit. | 2. To satisfy the second general standard, Jones must be without bias with respect to the client under audit. Jones has an obligation for fairness to the owners, management, and creditors who may rely on the report. Because of the financial interest in whether the bank loan is granted to Boucher, Jones is not independent in either fact or appearance with respect to the assignment undertaken. |

3. The auditor must exercise due professional care in the performance of the audit and the preparation of the report. | 3. This standard requires Jones to plan and perform the audit with due care, which imposes on Jones and everyone in Jones's organization a responsibility to observe the standards of fieldwork and reporting. Exercise of due care requires critical review at every level of supervision of the work done and the judgments exercised by those assisting in the examination. Jones did not review the work or the judgments of the assistants and clearly failed to adhere to this standard. |...