The following descriptions relate to an independent public accounting firm that has as clients some governments and not-for-profit entities that receive federal financial assistance.
REQUIRED:
For each of the following independent situations, describe the possible violations of GAO standards (Government Auditing Standards) and conclude whether or not the situation is a violation.
a) A college graduate who is not a CPA is assigned by her firm to the audit of Grover County. Because she is not a CPA, the firm did not send her to any continuing education courses this year or last year.
b) An auditor has prepared working papers using a new computer software package. The financial statements and audit reports generated by the software are well designed and incorporate all required accounting and auditing standards. Because the program is so powerful, it is also quite complex. Printouts of the financial statements and supporting schedules do not include much of the information necessary to determine that the auditor was justified in his/her conclusion. Most of that information is part of the computer program, however.
c) While auditing a not-for-profit entity, the auditor discovered that a secretary had been embezzling money from the petty cash fund. In relation to the financial statements taken as a whole, the amount stolen was not material. The auditor discussed the issue with the entity's management. The theft was reported to the appropriate law enforcement personnel and the bonding company reimbursed the not-for-profit entity for the full amount of its loss. Since there was no effect on the financial statements, the theft was not mentioned in the auditor's report.
d) The internal auditor of Sunningdale City reports to the city's chief financial officer. The internal auditor audited the city's health and welfare division for purposes of expressing an opinion on the financial statements prepared by that division and submitted to a federal agency.

Question

Quizplus · Accepted Answer

The Answer of The following descriptions relate to an independent public accounting firm that has as clients some governments and not-for-profit entities that receive federal financial assistance.
REQUIRED:
For each of the following independent situations, describe the possible violations of GAO standards (Government Auditing Standards) and conclude whether or not the situation is a violation.
a) A college graduate who is not a CPA is assigned by her firm to the audit of Grover County. Because she is not a CPA, the firm did not send her to any continuing education courses this year or last year.
b) An auditor has prepared working papers using a new computer software package. The financial statements and audit reports generated by the software are well designed and incorporate all required accounting and auditing standards. Because the program is so powerful, it is also quite complex. Printouts of the financial statements and supporting schedules do not include much of the information necessary to determine that the auditor was justified in his/her conclusion. Most of that information is part of the computer program, however.
c) While auditing a not-for-profit entity, the auditor discovered that a secretary had been embezzling money from the petty cash fund. In relation to the financial statements taken as a whole, the amount stolen was not material. The auditor discussed the issue with the entity's management. The theft was reported to the appropriate law enforcement personnel and the bonding company reimbursed the not-for-profit entity for the full amount of its loss. Since there was no effect on the financial statements, the theft was not mentioned in the auditor's report.
d) The internal auditor of Sunningdale City reports to the city's chief financial officer. The internal auditor audited the city's health and welfare division for purposes of expressing an opinion on the financial statements prepared by that division and submitted to a federal agency.

The Following Descriptions Relate to an Independent Public Accounting Firm