Adam Levinewas recently promoted to senior accountant. He was put in charge of the Live Lightlyaudit because of his experience with other similar clients. Live Lightlyhas a small, but growing chain of stores that carry all natural, health conscious products.

This is the first year Live Lightly has been audited.

Because of its growth, Live Lightly needs additional capital. Live Lightly intends to take its audited financial statements to a bank to secure a loan.

Adam Levine has been assigned two inexperienced staff assistants for the audit. Because this is his first audit as a senior, he intends to bring the job in on budget.

To save time, he gave the assistants the audit program for another client of the firm called Health Hut Stores. He told his staff that this would make things go more quickly.

The assistants told Adam that the audit program did not always match up with what they found at Live Lightly.

Adam responded, "Just cross out whatever is not relevant in the audit program and don't add anything-it will only make us go over the budget."

He also told them that he could not spend much time with them at the client's place of business because "my time is billed out at such a high rate, we'll go right over budget." He did call them once a day from another audit on which he was working.

When Adam Levine came out near the end of fieldwork, one assistant communicated her concern that they had not attended the inventory counts at any of the out-of-town locations of Live Lightly.

The audit program had stipulated that inventory should be observed for in-town stores only. The auditprogram for Health Hut Storeswas different because this client had only one store in town, while the new auditee - Live Lightly -had three of their five stores in other cities.

Adam Levine told the assistant to get inventory sheets from the client for the other stores.

He added, "Make sure that the inventory balance in the general ledger agrees with the total for all the inventory sheets."

The next day, Adamreviewed all work papers and submitted the job for review by the manager.

Required:

[A]Name and describe three (3)GAAS examination standardsthat are being violated in this audit case. [6 marks]

[B]Why do you believe that the Live Lightlyaudit is not in compliance with these three (3) examination standards? Explain and support your answer with details from the case.