Auditing and assurance services 11th edition

2-25

Dale Boucher, the owner of a small electronics firm, asked Sally Jones, CPA, to conduct an audit of the companys records. Boucher told Jones that the audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Jones immediately accepted the engagement and agreed to provide an auditors report within one month. Boucher agreed to pay Jones her normal audit fee plus a percentage of the loan if it was granted.

Jones hired two recent accounting graduates to conduct the audit and spent several hours telling them exactly what to do. She told the new hires not to spend time reviewing the entitys system of internal control but to concentrate on proving the mathematical accuracy of the general and subsidiary ledgers and summarizing the data in the accounting records that supported Bouchers financial statements. The new hires followed Joness instructions and after two weeks gave Jones the financial statements excluding footnotes. Jones reviewed the statements and prepared an unqualified auditors report. The report did not refer to generally accepted accounting principles, and no audit procedures were conducted to verify the year-to-year application of such principles.

Required: Briefly describe the four categories of Principles Underlying an Audit Conducted in Accordance with Generally Accepted Auditing Standards and indicate in what ways the action(s) of Jones violate(s) each of the four categories of principles. (AICPA, adapted)