Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 57

Performance Principle. You have accepted the engagement of auditing the financial statements of the C. Reis Company, a small manufacturing firm that has been your client for several years. Because you were busy writing the report for another engagement, you sent a staff accountant to begin the audit with the suggestion that she start with accounts receivable. Using the prior-year's audit documentation as a guide, she prepared a trial balance of the accounts, aged them, prepared and mailed positive confirmation requests, examined underlying support for charges and credits, and performed other work she considered necessary to obtain evidence about the validity and collectability of the receivables. At the conclusion of her work, you reviewed the audit documentation she prepared and found she had carefully followed the prior-year's audit documentation.
Required:
The opinion rendered by auditors states that the audit was made in accordance with generally accepted auditing standards. Identify the important components of the performance principle and relate them to the audit of C. Reis Company by indicating how they were fulfilled or, if appropriate, how they were not fulfilled.