Mangimeza, the owner of a small company, phoned Holmes, a CGA, and asked him to conduct an audit of the company$$s records. Mangimeza told Holmes that an audit needed to be completed in time to submit audited financial statements to the bank as part of a loan application. Holmes accepted the engagement over the phone and agreed to provide an audit report within $3$ weeks.

Holmes hired two accounting students $($who were in their first module of the CPA program$)$ to conduct the audit and spent one hour telling them what to do$.$ Holmes told the students not to spend time on internal controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarizing the data in the accounting records that support Mangimeza$$s financial statements. The students followed Holmes$$ instructions and after two weeks gave Holmes the financial statements, which did not include footnotes. Holmes reviewed the statements and prepared an unqualified $($clean$)$ auditor$$s report to deliver to Mangimeza.

Summary of Guiding Auditing Standard:

Purpose of the Audit $$ to provide an opinion about the financial statements. An audit is conducted on the premise that management is responsible for the preparation of the financial statements and establishing and maintaining internal controls, and that management will provide the auditor with full access to documents and records.

Responsibilities $$ auditors should possess appropriate competence and capabilities, comply with ethical and independence requirements, maintain professional skepticism and exercise professional judgement.

Performance $$ auditors should obtain reasonable assurance about whether financial statements are free of material misstatement, plan work and supervise assistants, determine and apply materiality level or levels, identify and assess risks of material misstatement based on their understanding of entity and its environment $($including internal controls$),$ and obtain sufficient appropriate audit evidence.

Reporting $$ auditors should express an opinion on financial statements in a written report, state whether financial statements were presented in accordance with financial reporting framework.

Required:

Choose two standards $($from Auditing Standard, above$)$ that were violated and briefly describe how the actions of Holmes resulted in a failure to comply with these standards. Describe what Holmes should have done differently.