Solution manual auditing and assurance services 13e by arens chapter 05

n Only Barbara can decide One reasonable approach is for Barbara to start by discussing the matter further with Jack She should listen carefully to his reasoning and express her reservations about throwing the schedules away She should not subordinate her judgment to Jack, as this would be a violation of Rule of Conduct 102 If Jack satisfies her that it is acceptable to throw the schedules away (this seems unlikely in the circumstances), then she may be justified in doing so However, if she still has reservations, she should inform Jack that she intends to contact a manager or partner Practitioners voluntarily agree to abide by the Code as they enter public practice It is imperative that individuals at least comply with the minimum standards specified by the Code of Professional Conduct, despite pressures one may face Concealing a known material misstatement in a client's financial statements is clearly a violation of a practitioner's responsibility to society Bob Smith in essence condoned Oake's behavior by doing nothing His inaction is worthy of sanction by his firm, the AICPA, and the state Board of Accountancy At a minimum, practitioners must draw the line by complying with the Rules of Conduct specified in the Code of Professional 5-17 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 5-29 (continued) Conduct Violations of the Code are not acceptable Hopefully, most practitioners strive to uphold the ethical principles specified in the Code of Professional Conduct 5-30 a Peter acts unethically He should comply with the HKICPA Statements of Professional Ethics/Code of Ethics for Professional Accountants It is inappropriate to provide unethical advice to John Caine to record those personal expenses through the add value transactions of the Octopus card b The amount being added to the Octopus card is not an expense transaction, but merely a switch of money from paper money to electronic one Recording the add value operations as expenses will lead to overstatement of expenses Therefore, you should inform the client that they are presenting incorrect information in their financial statements and should request your client to make adjustments In case the client refuses to correct and the amount involved is material, you should withhold the audit report or withdraw from the audit engagement Internet Problem Solution: PCAOB Disciplinary Actions 5-1 The Sarbanes-Oxley Act granted the Public Company Accounting Oversight Board (PCAOB) investigative and disciplinary power over auditors of public companies During the course of conducting inspections of auditing firms, the PCAOB may become aware of certain behaviors or other matters that may lead to an investigation Such was the case, when the PCAOB contacted Goldstein and Morris to inform the firm that it would begin an inspection in November 2004 Shortly after being notified of the impending inspection, the firm’s managing partner along with two other partners determined to conceal certain information from the PCAOB Visit the PCAOB’s website [http://www.pcaobus.org/Enforcement/ Disciplinary_Proceedings/index.aspx] to learn about the disciplinary proceedings against the firm and the partners involved in this case and then answer the following questions You should read two sets of proceedings, one related to the firm of Goldstein and Morris CPAs, P.C and the other related to Goldberger and Postelnik What specific client-related matters prompted Goldstein and Morris’s decision to conceal certain information from the PCAOB? Answer: From October 2003 to July 2004, Goldstein and Morris CPAs, P.C prepared financial statements for two entities, RTG and NYFW, which it also audited during the same period After being notified 5-18 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com that the PCAOB was requesting certain information related to the audits of these entities, the firm’s managing partner and two other partners engaged in efforts to conceal the nature of the services provided to RTG and NYFW In addition, the partners recognized that there were certain deficiencies in the audit documentation related to the audits of RTG and NYFW which were covered up by creating documentation and back-dating so that it would appear as though the documentation had been created during the audit What sanctions were imposed on the firm, the managing partner, and the two other partners involved in the investigation? Were these sanctions fair? 5-19 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Internet Problem 5-1 (continued) Answer: The PCAOB revoked the registration of Goldstein and Morris CPAs, P.C and barred the managing partner, Edward Morris, from being associated with a registered firm in the future The two remaining partners, Alan Goldberger and William Postelnik, received censures from the PCAOB because they voluntarily disclosed their misdeeds to the PCAOB completely and in a timely fashion before the PCAOB relied upon the false information Were the sanctions fair? Student answers will vary, but their responses should discuss the voluntary nature of the two partners’ confessions and the potential implications of providing false information to the PCAOB (Note: Internet problems address current issues using Internet sources Because Internet sites are subject to change, Internet problems and solutions may change Current information on Internet problems is available at www.pearsonglobaleditions.com/arens) 5-20 ... the firm and the partners involved in this case and then answer the following questions You should read two sets of proceedings, one related to the firm of Goldstein and Morris CPAs, P.C and the... Goldberger and Postelnik What specific client-related matters prompted Goldstein and Morris’s decision to conceal certain information from the PCAOB? Answer: From October 2003 to July 2004, Goldstein and. .. financial statements for two entities, RTG and NYFW, which it also audited during the same period After being notified 5-18 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com