e. An audit of a U.S. not-for-profit organization. f. An audit of a U.S. private company to be used for a loan from a publicly traded bank. g. An audit of a U.S. public company. h. An audit of a U.S. public company that is a subsidiary of a Japanese company that will be used for reporting by the parent company in Japan. 2-20 (OBJECTIVE 2-7) 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 application. Holmes 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 mathematical accuracy of 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 reviewed the statements and prepared an unmodified auditor's report. The report did not refer to generally accepted accounting principles or to the consistent application of such principles Briefly describe each of the principles underlying AICPA auditing standards and indicat how the action(s) of Holmes resulted in a failure to comply with each principle. Organize your answer as follows:* Holmes' Actions Resulting in Failure to Comply with the Principle Brief Description of Principle lud on Auditing (ISAs) are issued by the Internation yeh site to learn m BRIEF DESCRIPTION OF PRINCIPLE RESPONSIBILITIES PRINCIPLES HOLMES' ACTIONS RESULTING IN FAILURE TO COMPLY WITH PRINCIPLE The auditor must possess the competency and capabilities to perform the audit. The auditor must comply with ethical requirements, which include maintaining independence in mental attitude in all matters relating to the audit. The auditor must maintain professional skepticism and exercise professional judgment in the performance of the audit and the preparation of the report. BRIEF DESCRIPTION OF PRINCIPLE HOLMES' ACTIONS RESULTING IN FAILURE TO COMPLY WITH PRINCIPLE PERFORMANCE PRINCIPLES The auditor must adequately plan the work and must properly supervise any assistants. 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. 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. 2-20 (continued) BRIEF DESCRIPTION OF PRINCIPLE HOLMES' ACTIONS RESULTING IN FAILURE TO COMPLY WITH PRINCIPLE REPORTING PRINCIPLES ://bbhosted.cuny.edu/webapps/blackboard/content/listContent.jsp?cm D UI.. 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. The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed in the auditor's report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefor in the auditor's report. In all cases where an auditor's name is associated with financial statements, the auditor should clearly indicate the character of the auditor's work, if any, and the degree of responsibility the auditor is taking, in the auditor's report. The auditor must assess whether the financial statements are presented in accordance with the financial reporting framework