What is the purpose of the communication between the successor and the predecessor auditor? b. How does communication aid in assessing audit risk? c. What position should Jameel & Soften assume in the present situation? How should they respond to Danson’s refusal to permit communication with the predecessor auditor?
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The board of directors of Danson Company limited asked Jameel & Soften, a Private Auditing
Firm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel &
Soften explained the need to make an enquiry of the predecessor auditor and requested
permission to do so. Danson’s board of directors refused to honor the request on the grounds that
relations with the predecessor had deteriorated so significantly that Jameel & Soften would
receive biased and defamatory information from the predecessor.
a. What is the purpose of the communication between the successor and the predecessor
auditor?
b. How does communication aid in assessing audit risk?
c. What position should Jameel & Soften assume in the present situation? How should they
respond to Danson’s refusal to permit communication with the predecessor auditor?
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- The board of directors of Danson Company limited asked Jameel & Soften, a Private Auditing Firm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel & Soften explained the need to make an enquiry of the predecessor auditor and requested permission to do so. Danson’s board of directors refused to honor the request on the grounds that relations with the predecessor had deteriorated so significantly that Jameel & Soften would receive biased and defamatory information from the predecessor. Required What is the purpose of the communication between the successor and the predecessor auditor? How does communication aid in assessing audit risk? What position should Jameel & Soften assume in the present situation? How should they respond to Danson’s refusal to permit communication with the predecessor auditor?The board of directors of Danson Company limited asked Jameel & Soften, a Private Auditing Firm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel & Soften explained the need to make an enquiry of the predecessor auditor and requested permission to do so. Danson’s board of directors refused to honor the request on the grounds that relations with the predecessor had deteriorated so significantly that Jameel & Soften would receive biased and defamatory information from the predecessor.Requireda. What is the purpose of the communication between the successor and the predecessor auditor?b. How does communication aid in assessing audit risk?c. What position should Jameel & Soften assume in the present situation? How should they respond to Danson’s refusal to permit communication with the predecessor auditor?Smith and Johns, a CPA firm, was approached by Pioneer Company to conduct an audit for its financial statements for the year 2020. Smith and Johns asked Pioneer Company to grant it an approval to contact the predecessor auditor before giving its acceptance on the new engagement. Smith and Johns would most probably inquire the predecessor auditor about the following issue(s): * O Audit fees O Partner's salary Reasons for change of auditors O All of the above None of the above
- While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: 1. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. III. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that allows the…While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: I. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. - DONE II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. DONE III. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that…While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: I. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. Required:For each independent situation, state the type of audit report that you should issue and give reasons for…
- Smith and Johns, a CPA firm, was approached by Pioneer Company to conduct an audit for its financial statements for the year 2020. Smith and Johns asked Pioneer Company to grant it an approval to contact the predecessor auditor before giving its acceptance on the new engagement. Smith and Johns would most probably inquire the predecessor auditor about the following issue(s): * Management integrity Fraud and illegal acts committed in pri years Reasons for change of auditors All of the above None of the aboveWhile completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that allows the wine to…Independent Auditor's ReportWe have audited the consolidated financial statements of Concord, Inc., and subsidiaries as of September 30, 2019,and the related consolidated statements of income, changes in stockholder's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Biotherm, Inc., a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 22%and 20% respectively at September 30, 2019 of the consolidated totals. Those statements were audited by Ball &Brown, CPAs, whose reports have been furnished to us, and our opinion, insofar as it relates to the amountsincluded for Biotherm, Inc. is based solely on their report.We conducted our audit in accordance with generally accepted auditing standards. Those standards require thatwe plan and…
- While completing your audit work for the 30 June 2022 audit of Bexca Ltd, you become aware of the following material matters: (i) On 5 July, Blue Pty Ltd, a major customer of Bexca Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Bexca Ltd as at balance date, management of Bexca Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2022 financial report. However, they are prepared to disclose this information as a note to the financial report. (ii) One of Bexca’ major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. (iii) On 25 July, a well-known financial planner advised his clients not to invest in Bexca due to poor long-term growth prospects. The market price for Bexca’s shares subsequently declined by 40%. (iv) A note to the financial report of Bexca Ltd refers to an agreement to sell its major subsidiary,…Consider the following given phrase that is not included in the opinion paragraph of thestandard (unqualified) auditor’s report:“The financial statements present correctly, the financial position of ABC Company as at December 31, 2019, and its financial performance and its cash flows for the year then ended inaccordance with Canadian generally accepted auditing standards.”i. What is the correct phrase that is included in the opinion paragraph of the standard(unqualified) auditor’s report?ii. Briefly explain why the given phrase is a poor replacement for the correct phraseYou were assigned to audit the financial statements of Swansea Corporation as at and for the year ended December 31, 2021. Your senior asked you to draft a memo on materiality and tolerable error for your client. Swansea Corporation has incurred substantial net losses due to COVID-19 pandemic. Up to 2019, it has been profitable. Which of the following is least likely to be your starting point in computing materiality? Group of answer choices Normalized net income Net loss Total assets Normalized revenue