Reference no: EM13903509
As the audit senior for the First Hardware Ltd.'s (First Hardware) audit, you are happy with the smoothness of the audit undertaken for the year ended 30 June 2015. Today, your audit partner tells you that First Hardware has gone into liquidation. The financial controller was diverting company funds into a Swiss bank account and has left the country to live in Majorca. The lawyers for First Hardware are taking action against the audit partner for not performing an appropriate audit. They believe that a properly conducted audit should have detected such a fraud.
The fraud was substantial; however it was not material from the company's point of view. You explain to the partner that the audit was performed in accordance with all auditing standards and nothing was found to arouse suspicion during the audit. The audit took the same amount of time as last year's, and all appropriate work steps were performed. Your work was reviewed by a manager and the entire file was reviewed by the audit partner.
The audit partner is still concerned. He brings an audit partner is an associated office of your accounting firm and asks her to review the audit file. She agrees and spends a day reviewing the file. After completing her review, she is satisfied that the audit was performed properly.
Required:
Explain the following:
1. Whether your accounting firm has acted with reasonable care and skill.
2. How the lawyers for First Hardware might present the case against the auditor.
3. How the auditor partner might defend the claim.
4. What you think the court's decision will be if the case goes to trial.
5. Why the audit partner may offer First Hardware a substantial settlement amount, even if the partner is convinced he acted with reasonable care and skill.
|
Calculate the mean mode and standard deviation
: Construct a frequency distribution table (you can do this using the table icon in your rich text editor) and calculate the mean, mode, and standard deviation of the data. Develop a scenario that best represents the data you selected and discuss wh..
|
|
Examine how changes in social and economic conditions
: Examine how changes in social and economic conditions and technology
|
|
Identify if and how inherent or control risk is affected
: Identify if and how inherent or control risk is affected. Explain how that will impact on audit risk. Explain how detection risk will be affected in response to (b).
|
|
Show the estimated regression equation
: 1. Develop a simple regression model with paint sales (Y) as the dependent variable and selling price (P) as the independent variable. a. Show the estimated regression equation.
|
|
How the auditor partner might defend the claim
: How the auditor partner might defend the claim. What you think the court's decision will be if the case goes to trial. How the lawyers for First Hardware might present the case against the auditor.
|
|
Apartment after the imposition of rent controls
: Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls. Do you think this policy will benefit students? Why or why not?
|
|
What is the expected number of cups of milk store will sell
: The amount of milk that the American Cookie Company sells in a given week is random. Suppose the milk sells for $2.00 per cup and it costs the store $1.50 per cup. What is the expected number of cups of milk the store will sell in a given week
|
|
Minimum wage does not cause some workers
: The minimum wage in year 1 is $1 higher than the equilibrium wage. In year 2, the minimum wage is increased so that it is $2 above the equilibrium wage. We observe that the same number of people is working at the minimum wage in year 2 as in year ..
|
|
Find equation of state which relationship between p,v,n,t
: The number of states is expressed as a function of various parameters for three systems below. For each, find an "equation of state" which gives the relationship between p, V, N, and T.
|