Please match the list of Principles with "Alphabetic characters" in the first column having its description in the second column with the roman numerals in the third column describing the kind of failure listed nn the fourth column. For instance: The answer to the "A" principle is "vii", hence the written answer is "A and vii" for the first listed principle.

Ray, the owner of a small company, asked Holmes, a CPA, to conduct an audit of the company's records. Ray told Holmes that an audit was to be completed in time to submit audited financial statements to a bank as part of a loan a immediately accepted the engagement and agreed to provide an auditor's report within three weeks. Ray agreed to pay Holmes a fixed fee plus a bonus if the loan was granted. Holmes hired two accounting students to conduct the audit and spent several hours telling them exactly what to do. Holmes told the students not to spend time reviewing internal controls but instead to concentrate on proving the ledger accounts and summarizing the data in the accounting records that supported Ray's financial statements. The students followed Holmes's instructions and after two weeks gave Holmes the financial statements, which did not include footnotes. Holmes prepared an unmodified auditor's report. The report did not refer to generally accepted accounting principles or to the consistent application of such principles. Identify each of the principles underlying AICPA auditing standards in the first column by selecti to each of the principles. Use the third column to identify by Roman number (from the list of failures) how the action of Holmes resulted in a failure to comply with each standard from the list of principles given in the first two columns Brief descirption of principles Holmes action resulting in failure to comply with principle Below A The auditor must possess the competency and Because of the financial interest in whether the capabilities to perform the audit. bank loan is granted to Ray, Holmes is i. independent in neither fact nor appearance with respect to the assignment undertaken. A and vil B The auditor must be at least 21 years of age. . Holmes acquired no evidence that would support ii. the financial statements. Holmes merely checked the mathematical accuracy of the records and summarized the accounts, Standard audit procedures and techniques were not performed. The auditor must comply with ethical Maintaining professional skepticism and requirements which include maintaining exercising professional judgment require critical Independence in mental attitude in all matters review at every level of supervision of the work relating to the audit iii. done and the judgments exercised by those assisting in the audit. Holmes did not review the work or the judgments of the assistants. d. The auditor must maintain professional Although Holmes' report contains an expression skepticism and exercise professional judgment of opinion, such opinion is not based on the in the performance of the audit and the results of a proper audit. Holmes should disclaim preparation of the report. an opinion because he failed to conduct an audit iv. in accordance with auditing standards. The auditor must adequately plan the work and Holmes accepted the engagement without must properly supervise any assistants. considering the availability of competent staff. In addition, Holmes failed to supervise the assistants. c. e. V The auditor must identify and assess the risks of material misstatement based on a sufficient understanding of the entity and its environment, including its internal control, to design the nature, timing, and extent of further audit procedures. Homes did not perform in excess of 50% of the detailed audit work. As such, the audit was not properly staffed. Vi. 9 The quality control partner must test the quality control procedures at least annually to ensure the firm is in compliance. vii. h. vill. The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit. The auditor must express an opinion in a written report about whether the financial statements are presented in accordance with the applicable financial reporting framework Ix It was inappropriate for Holmes to hire the two students to conduct the audit. The audit must be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the audit as long as there is proper supervision and review There was no quality control partner assigned to oversee the engagement. As such, the engagement was not properly staffed no properly supervised. Holmes' improper audit would not enable him to determine whether generally accepted accounting principles were followed. Holmes report should make no reference to the consistent application of accounting principles. Management is primarily responsible for adequate disclosures in the financial statements, but when the statements do not contain adequate disclosures the auditor should make such disclosures in the auditor's report. In this case both the statements and the auditor's report lack adequate disclosures. Holmes' report made no reference to generally accepted accounting principles. Because Holmes did not conduct a proper audit, the report should state that no opinion can be expressed as to the fair presentation of the financial statements in accordance with generally accepted accounting principles. Holmes did not obtain an understanding of the entity or its internal control, nor did the assistants obtain such an understanding. The audit partner must perform most (in excess of 50%) of the detailed audit work. k. xi. When the auditor determines that informative disclosures are not reasonably adequate, the auditor must so state in the auditor's report The auditor must assess whether the financial statements are presented in accordance with the financial reporting framework m