Can you answer the cases number 1 and 2? ACCT 4240 Hand-Out Cases # 125 Dr. Zabi Rezaee Case 1 Characteristics of Auditing The following three statements are representative of attitudes and opinions sometimes encountered by CPAs in their professional practices. 1. Todays audit consists of testing only selected transactions. This is dangerous because testing depends upon the auditors judgment, which may be defective. An audit can be relied upon only if every transaction is verified. 2. An audit by a CPA is essentially negative and contributes to neither the gross national product nor the general well-being of society. The auditor does not create but merely checks what someone else has done. 3. One should read the footnotes to financial statements, even though they are often presented in technical language and are incomprehensible. The auditor may reduce exposure to third-party liability by stating something in the footnotes that contradicts completely what has been presented in the balance sheet or income statement. REQUIRED: Evaluate each of the above statements and indicate: A. Areas of agreement with the statement, if any. B. Areas of misconception, incompleteness, or fallacious reasoning included in the statement, if any. Complete your discussion of each statement (both parts A and B) before going on to the next statement. Case 2 Leigh Whitney finished high school at the top of her class and was a straight-A student at Central State College, where she was enrolled in the business department for nearly three years. While attending college, she worked in the general accounting office of Century Manufacturing Company. She advanced so rapidly that she dropped out of college and devoted her time to work and a home-study course in accounting. In addition to completing the home-study course, she had assisted the public accountants for three years in conducting the audit of Century Manufacturing Company. One of the managers of the auditing firm told Whitney, in confidence, that he would rather have her as an assistant than either of the two junior accountants assigned to the audit. Leigh has come to you to discuss establishing a firm to practice public accounting. What would you tell her, particularly concerning the first general standard of accounting