Jeffrey Wang, a CPA and an auditor, makes the following comment, The audit process is all about gathering evidence. A key part of the process is to gather evidence efficiently and effectively. What exactly does Jeffrey mean by this comment?

Question 2 (4 marks)

You have been asked by the accounting teacher at the local high school to explain to students interested in accounting why society needs auditors. Briefly outline your response.

Question 3 (10 marks)

Required

For each of the following independent situations, state whether the CPA has violated the CHARTERED PROFESSIONAL ACCOUNTANTS OF ONTARIO Professional Rules of Conduct and/or Independence Standard, and explain your reasoning.

a. Emily, CPA, owns a material amount of units in a mutual fund that owns stock in Emilys largest audit client. Reading the mutual funds most recent financial report, Emily learned that the mutual fund significantly increased its holdings in her client. (2 marks)

b. Martha, CPA, has a practice with two departments. One department performs assurance services and the other performs bookkeeping services. One of her publicly accountable audit clients lost its controller and the bookkeeping department provided controllership services for 30 days while the company searched for a new controller. As this was an emergency, it was necessary for Marthas firm to provide the service because it has an intimate knowledge of the clients system. (2 marks)

c. Emma, CPA, is the auditor for Nestco (a public company) and recommends that the company improve its internal controls. She accepts a 90-day engagement to design and implement new controls and to train company staff on them. (2 marks)

d. Harry, a CPA student, is currently employed by a CPA firm in public practice. He accepts a 15% discount on purchases from an audit client. Harry believes that he has not violated the Rules of Conduct because he is not yet a CPA member and the discount is at the same percentage that is available to the clients own staff members. (2 marks)

e. Irene, CPA, provides various services for Simply Fashion Inc., a privately held company. She completes all of Simply Fashion Inc.s tax work, including preparing the annual corporate tax filing and performing tax consulting services. Recently Simply Fashion Inc. began negotiations for a new bank loan, and a condition of the loan is that Simply Fashion must provide the bank with audited financial statements on an annual basis. Simply Fashion has asked Irene to complete the annual audit and to continue to perform the tax services she already performs. Irene accepted the engagement, and in order to improve audit efficiency, she has assigned the team that completes the tax work to the financial statement audit.