Reference no: EM132161533

Question -

Case - Ryan McGuire is an auditor for a large CPA firm. McGuire was recently assigned to perform a financial statement audit of Kraft Brewery, Inc., a brewery and distributor of German specialty foods. McGuire's firm is auditing Kraft for the first time. The audit is nearly complete, but it has required more time than expected. The auditors who performed the planning and testing phases have now been assigned to another client engagement, so McGuire was called in to carry out the completion / reporting phase.

In discussing the details of the audit engagement with the original audit team, McGuire learned that the original team expected that an unqualified audit opinion would be issued. This expectation was based on the extent of audit evidence accumulated, which led to the belief that the financial statements were fairly presented in accordance with GAAP.

Harold Stebbines, Kraft's CFO, is unhappy about the change in audit personnel. He is threating to refuse to furnish a letter of representation.

Required:

a. Would it be appropriate for McGuire to reopen the audit testing phases in order to expand procedures, in light of the lack of representative evidence from management? Why, or why not?

b. Will McGuire's firm still be able to issue an unqualified audit report if it does not receive the representation letter? Research the standard wording to be included in an unqualified audit report, as well as the typical wording included in a client representation letter. Base your answer on your finding.