Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

smmrize this article? CVB audited Yuhes financial statements for its fiscal year ending December 31, 2008, and issued an audit report containing an unqualified opinion.

smmrize this article?

CVB audited Yuhes financial statements for its fiscal year ending December 31, 2008, and issued an audit report containing an unqualified opinion. In order to perform field work in China for this audit, CVB contracted with accounting personnel in a Shanghai, China independently owned member firm of an international public accounting network firm (hereafter, Shanghai Office). In conducting Yuhes 2008 audit, CVB did not place any reliance on Yuhes internal controls due to CVBs assessment that Yuhes internal controls were ineffective. As a result, CVB conducted a fully substantive audit and did not reduce any substantive testing in its audit procedures based upon assessment or testing of internal controls. 9. CVB continued its engagement as Yuhes auditor for Yuhes 2009 fiscal year, and conducted interim reviews of Yuhes financial statements for that fiscal years first, second, and third quarters. However, in late 2009 during Yuhes fourth fiscal quarter, the Shanghai Office was acquired by another international public accounting firm (hereafter, the Acquiring Firm). 10. Following this acquisition, on December 7, 2009, the Audit Committee of Yuhes Board of Directors appointed the Acquiring Firm as Yuhes independent auditor. Under the engagement agreement, the Acquiring Firm was to perform the 2009 year-end audit and opine on the 2009 financial statements. Thereafter, from December 2009 through February 2010, the individuals who were formerly the Shanghai Office personnel working on Yuhes audits, but now employees of the Acquiring Firm, planned and executed the Yuhe audit under the Acquiring Firms supervision and in accordance with the Acquiring Firms audit approach. 11. During its audit procedures and fieldwork, the Acquiring Firm identified in Yuhes books and records, as of February 2010, ongoing related party transactions which Yuhe had earlier asserted in a public filing would be discontinued by December 31, 2009. In the prior year, Yuhes management had concluded that the related party transactions constituted violations of Section 402 of the Sarbanes-Oxley Act of 2002 and that a material weakness existed over the lack of review and approval of related party loans, due to Yuhes management permitting these transactions without Board of Director approval. On March 5, 2010, the Acquiring Firm resigned from the engagement, and Yuhes Form 8-K filing cited the prohibited related party loan, the material weakness over the review and approval of such loans, and a material weakness related to Yuhes inability to properly close its books as the reasons for the Acquiring Firms resignation. At the time of its resignation, the Acquiring Firms audit field work for the 2009 audit of Yuhe was incomplete. 12. Yuhes due date for filing its 2009 Form 10-K with the Commission was March 31, 2010, less than a month after the Acquiring Firms resignation. With such a short time period before its filing deadline, Yuhe approached CVB to return as its independent auditor and complete the 2009 audit. Respondents accepted Yuhes request and, on March 9, 2010, CVB re-engaged as 5 Yuhes independent auditor. Only twenty-one days later, on March 30, 2010, Anderson, with Van Wagoners concurrence, issued CVBs audit report containing an unqualified opinion on Yuhes financial statements for the 2009 fiscal year.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditor Essentials 100 Concepts Tips Tools And Techniques For Success

Authors: Hernan Murdock

1st Edition

1138036919, 978-1138036918

More Books

Students also viewed these Accounting questions

Question

In most cases, medication is prescribed by physicians.

Answered: 1 week ago