Consider the mini-case study below to:

Identify 5 audit failures (there are more) within the case, AND

for each failure, identify the audit standard being violated.

Please use either "bullets" or "numbering" to separate each item in your answer. Each bullet/numbered-item should address both the case's audit failure as well as auditing standard being violated.

MINI-CASE STUDY

Following a period of growth, ABC Company, a publicly-held corporation with $50 million in annual revenues, wants their audit completed by a national firm instead of a regional firm. Their CFO, Joe Smith, meets with Kristen Jones, CPA and partner of a national accounting firm. Two weeks later, after analyzing ABC and meeting with ABC's previous auditors and legal counsel, Kristen and her firm decide to perform the audit.

As a partner, Kristen has several ongoing audits, but she immediately staffs the team with four audit department members who recently graduated from college and just got back from the firm's two-week training program. One of the auditors knows that her parents own $6,000 of ABC's common stock and that this investment is less than 1% of her parent's overall portfolio.

Kristen hands the team a copy of the work papers of a similar client (that needed three auditors) whose audit was deemed of high quality and tells them to use those work papers as a guide. Additionally, because the previous auditors let Kristen know that ABC's internal controls were very strong, Kristen tells the audit team to conduct their substantive testing with control risk assessed as low. Before heading to another client, Kristen tells the team to call her with any questions.

During their two weeks of field work, the four auditors compiled evidence including detailed testing of ABC's bank reconciliations (5% of assets), analytical procedures regarding the accounts receivable balance (18% of total assets), the observation of the physical inventory (20% of assets) and the physical examination of ABC's PP&E (45% of total assets). Positive confirmations were obtained from ABC's banks and suppliers. No other confirmations were sent. At the end of field work, Kristen met with the team for about ninety minutes to discuss their findings.

In evaluating the audit results the proposed auditor adjustments were all immaterial both at the account level and in the aggregate. ABC's inventory balances were calculated using the FIFO method and note 10 in the financial statements reflects that the company changed from the LIFO method during the calendar year, which represents a material change for ABC. After completing her evaluation, Kristen prepares two audit reports: (1) a report on internal control over financial reporting, and (2) a standard unqualified audit report on the financial statements (without any differences from a clean opinion such as modified wording).

Reminders: (1) Use bullets/numbering to separate your 5 identified failures, and (2) each bullet/numbered-item should address both the case's audit failure as well as auditing standard being violated.