Name:

Unit 1
Review Question 1-20
Type of Firm
Local

Characteristics
One to two offices, one or few CPAs as
partners

Regional

Local firms that have opened office in other

cities or states. Merge with other local firms

National

Offices in most major cities throughout the

United States

International

The Big four firms, Ability to audit large

corporations

Services Offered
income tax, consulting, and
accounting services, small
amount of auditing
Increased amount in services
as local firms and a larger
auditing presence
Offer services similar to local
and regional firms just on a
larger scale and international
dealings
Offers professional services,
auditing represents a large
portion of the services
provided

Question Requiring Analysis 1-26

Major Responsibilities of the PCAOB:
1.
2.
3.
4.

Oversee the accounting profession (Whittington, 2012)

Register public accounting firms that audit public companies (Whittington, 2012)
Perform inspections of the practices of registered firms (Whittington, 2012)
Conduct investigations and disciplinary proceedings of registered firms (Whittington,
2012)
5. Sanction registered firms (Whittington, 2012)

Review Question 2-7

Things to consider in your answer: Is the first statement correct? Is the second statement
correct? Can an auditor issue ANY opinion without having performed an audit for that period?
Your Answer:
With the first statement I do agree that an unmodified audit report may be issued if the financial
statements are in accordance with GAAP and no misstatement or fraudulent was discovered

during the review. An unmodified (unqualified) opinion indicating that the audit was adequate in
scope and that the financial statements present fairly the financial position, results of operations,
and cash flows in conformity with generally accepted accounting principles. (Whittington,
2012) The Audit report is usually requested by management thus authorizing the need for an
audit report.
As for the second statement an auditor may not issue a qualified statement without having
performed a review or audit of the financial statements. The auditors responsibility is to
express an opinion on the financial statements based on having conducted an audit following
generally accepted auditing standards of the United States of America. (Whittington, 2012) If
the auditor has not reviewed the material he would have no grounds to give a qualified opinion
which states an error or fraudulent finding among the financial statements.
Questions Requiring Analysis 2-28
Be sure to check out pages 40-41!
Your answer:
Part A:
The responsibility of the auditor is perform an audit that will provide reasonable assurance
(Whittington, 2012) that financial statements of company under review are presented fairly of
free of error. When reviewing for unintentional (errors) or intentional (fraud) misstatements an
auditor should look for reasonable assurance to validate such issues.
Part B:
The responsibility of the auditor is to determine the clients noncompliance with laws and
regulations. With regards to laws and regulations that have a direct effect (Whittington, 2012)
on the financial statements the auditor needs an understanding of the guidelines of the law and
the framework of the entity and their policies for dealing with those laws. It is important the
auditor points out the noncompliance to help make the client aware so they may become
compliant.
Part C:
If the results of the audit find acts that client action are illegal in nature and have not made any
attempt to become compliant it is the duty of the auditor to report the matter to the next higher of
authority within the organization. When no higher authority exists that is uninvolved, or if the
auditors believe that the communication may not be acted upon or do not know whom to report
to, they should consider the need to obtain legal advice. (Whittington, 2012)

References
Whittington, R. (2012). Principles of Auditing & Other Assurance Services, 18th edition.
McGraw-Hill Irwin.