Problem 1-20 (Types of auditors and audits) After performing an audit, the auditor determines that. 1. The financial statements of a corporation are presented fairly. 2. A company?s receiving department is inefficient. 3. A company?s tax return does not conform with IRS regulations. 4. A government supply depot is not meeting planned program objectives. 5. The financial statements of a physician are properly prepared on a cash basis. 6. A foreman is not carrying out his assigned responsibilities. 7. The IRS is in violation of an established government employment practice. 8. A company is meeting the terms of government contract. 9. A municipality?s financial statements correctly show actual cash receipts and disbursements. 10. The postal service in midtown is inefficient. 11. A company is meeting the terms of a bond contract. 12. A department is not meeting the company?s prescribed policies concerning overtime work. Required a. Indicate the type of audit that is involved: (1) financial, (2) compliance, or (3) operational b. Identify the type of auditor that is involved: (1) independent, (2) internal, (3) government---GAO, or (4)government----IRS c. Identify the primary recipient(s) of the audit report: stockholders, management, Congress, and so on. Use the following format for Indicate the type of audit that is involved: Type of Audit Type of Auditors Primary Recipient . . . . . . . . Exercise 2-27 (Detection of misstatements including fraud) Reed, CPA, accepted an engagement to audit the financial statements of Smith Company. Reed?s discussions with Smith?s new management and the predecessor auditor indicated the possibility that Smith?s financial statements may be misstated due to the possible occurrence of errors, fraud, and illegal acts. Required a. Identify and describe Reed?s responsibilities to detect Smith?s errors and fraud. Do not identify specific audit procedures. b. Identify and describe Reed?s responsibility to report Smith?s errors and fraud. AICPA (adapted)

Problem 1-20 (Types of auditors and audits) After performing an audit, the auditor determines that. 1. The financial statements of a corporation are presented fairly. 2. A company's receiving department is inefficient. 3. A company's tax return does not conform with IRS regulations. 4. A government supply depot is not meeting planned program objectives. 5. The financial statements of a physician are properly prepared on a cash basis. 6. A foreman is not carrying out his assigned responsibilities. 7. The IRS is in violation of an established government employment practice. 8. A company is meeting the terms of government contract. 9. A municipality's financial statements correctly show actual cash receipts and disbursements. 10. The postal service in midtown is inefficient. 11. A company is meeting the terms of a bond contract. 12. A department is not meeting the company's prescribed policies concerning overtime work. Required a. Indicate the type of audit that is involved: (1) financial, (2) compliance, or (3) operational b. Identify the type of auditor that is involved: (1) independent, (2) internal, (3) government---GAO, or (4)government----IRS c. Identify the primary recipient(s) of the audit report: stockholders, management, Congress, and so on. Use the following format for Indicate the type of audit that is involved: Type of Audit Type of Auditors Primary Recipient . . . . . . . . Exercise 2-27 (Detection of misstatements including fraud) Reed, CPA, accepted an engagement to audit the financial statements of Smith Company. Reed's discussions with Smith's new management and the predecessor auditor indicated the possibility that Smith's financial statements may be misstated due to the possible occurrence of errors, fraud, and illegal acts. Required a. Identify and describe Reed's responsibilities to detect Smith's errors and fraud. Do not identify specific audit procedures. b. Identify and describe Reed's responsibility to report Smith's errors and fraud. AICPA (adapted)