Requirements

It is July $10,20$Y$5,$ and you receive an email from the accounting manager at ARGO CORP $($an issuer $$ publicly

traded company$)$ explaining how the company has accounted for a lease transaction originating on $12/31/$Y$3,$

set to expire at the end of $20$Y$6($this is the same lease transaction detailed in Part $1$ of the project, although you

are now the auditor, NOT an employee of ARGO CORP$).$

As this is a new audit engagement for your firm, UWF Audit Associates, the partner has asked for the senior on

the engagement $($you$)$ to review the transaction and develop an audit plan for the $20$Y$5$ audit of ARGO$$s lease

accounts $($both balance sheet and income statement related; both balance and transaction related assertions$).$

The partner would like you to draft a memo outlining your audit plan that addresses the following matters:

$$ Planning the Audit $$ Chapters $3$ and $4$

o $($assume the lease accounts are high$-$risk and contain significant judgments and estimates$)$

$$ Materiality $$ Chapter $3$

o $($address all aspects of materiality, including planning and performance materiality$)$

$$ Audit Risk $$ Chapters $3,6,7,$ and $9$

o $($address all aspects and components of audit risk$)$

$$ Audit Evidence $$ Chapter $5$

o $($at least three different types of evidence need to be addressed$)$

$$ Audit Assertions $$ Chapter $5$

o $($at least two different assertions need to be addressed$)$

$$ Types of Audit Tests: Tests of Controls versus Substantive Tests $$ Chapters $7$ and $9$

o $($include a thorough discussion of the difference between the two, their testing purposes, and

how the results of TOC would impact the substantive testing for leases$)$

In your memo, the partner would like you to provide references to the auditing standards that support your

strategy for the audit of ARGO$$s lease accounts. Additionally, for purposes of your memo, please feel free to

make assumptions as you see fit $($such as whether you believe ARGO has strong$/$weak internal controls, tone at

the top, etc...$),$ but you must detail those assumptions in your memo