2-21 BRIEF DESCRIPTION HOLMES’ ACTIONS RESULTING IN OF PRINCIPLE FAILURE TO COMPLY WITH PRINCIPLE RESPONSIBILITIES PRINCIPLES The auditor must possess the It was inappropriate for Holmes to hire the two competency and capabilities students to conduct the audit. The audit must to perform the audit. be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the audit as long as there is proper supervision and review. The auditor must comply To satisfy this principle, Holmes must be without with ethical requirements, which bias with respect to the client under audit. include maintaining Holmes has an obligation for fairness to the independence in mental attitude owners, management, and creditors who may in all matters relating to the rely on the report. Because of the financial audit. interest in whether the bank loan is granted to Ray, Holmes is independent in neither fact nor appearance with respect to the assignment undertaken. The auditor must maintain This principle requires Holmes to perform the professional skepticism and with due care, which imposes on Holmes exercise professional judgment and everyone in Holmes’ organization a in the performance of the audit responsibility to observe the principles of and the preparation of the performance and reporting. Maintaining report. professional skepticism and exercising professional judgment require critical review at every level of supervision of the work done and the judgments exercised by those assisting in the audit. Holmes did not review the work or the judgments of the assistants and clearly failed to adhere to this standard. 2-21 (continued) BRIEF DESCRIPTION HOLMES’ ACTIONS RESULTING IN OF PRINCIPLE FAILURE TO COMPLY WITH PRINCIPLE PERFORMANCE PRINCIPLES
2-21 BRIEF DESCRIPTION OF PRINCIPLE HOLMES’ ACTIONS RESULTING IN FAILURE TO COMPLY WITH PRINCIPLE RESPONSIBILITIES PRINCIPLES The auditor must possess the competency and capabilities to perform the audit. It was inappropriate for Holmes to hire the two students to conduct the audit. The audit must be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the audit as long as there is proper supervision and review. The auditor must comply with ethical requirements, which include maintaining independence in mental attitude in all matters relating to the audit. To satisfy this principle, Holmes must be without bias with respect to the client under audit. Holmes has an obligation for fairness to the owners, management, and creditors who may rely on the report. Because of the financial interest in whether the bank loan is granted to Ray, Holmes is independent in neither fact nor appearance with respect to the assignment undertaken. The auditor must maintain professional skepticism and exercise professional judgment in the performance of the audit and the preparation of the report. This principle requires Holmes to perform the with due care, which imposes on Holmes and everyone in Holmes’ organization a responsibility to observe the principles of performance and reporting. Maintaining professional skepticism and exercising professional judgment require critical review at every level of supervision of the work done and the judgments exercised by those assisting in the audit. Holmes did not review the work or the judgments of the assistants and clearly failed to adhere to this standard. 2-21 (continued) BRIEF DESCRIPTION OF PRINCIPLE HOLMES’ ACTIONS RESULTING IN FAILURE TO COMPLY WITH PRINCIPLE PERFORMANCE PRINCIPLES
Solution-Manual-for-Auditing-and-Assurance-Services-15th-Edition-by-Arens.docx