Auditing is performed by an auditor in an organization during a specified financial period that guides that organization. The main objective in requiring audit performance in an organization is to assess whether financial information provided by the organization conform to the Generally Accepted Accounting Principles (GAAP). Auditors are independent professionals in the field of Accounting and Auditing and an organization should ensure that their auditors have no other interests with the organization or its stakeholders. At the end of an auditing process an auditor is supposed to give an opinion based on the assessment done.
The auditor is supposed to make assertions and assurance in addition to the client’s assertion. There is a difference between review and audit of financial information because of the level of assurance. An audit provides a high level of assurance on the financial statements compared to the review of financial statements. In addition, with an audit the auditor is required to provide a high level of evidence to support assurance of the report while the less evidence is required in a review. An audit is quite more comprehensive in scope than the reviews thus providing enough information required by the users of financial statements in making decisions.
The audit is prepared and conducted annually while the review is conducted quarterly or mostly when need be. Ernst & Whinney failure to conduct an audit and opt for a review therefore implied the above differences. It is clear that the review was not comprehensive to provide enough information about ZZZZ Best Company financial statements. It can be argued that Ernst & Whinney did want to get into deeper details of ZZZZ Best Company because of the many complications it was associated with (Knapp 2008).
While performing an audit, an auditor relies heavily on information provided by a third party, that is, the client’s representatives. Usually a third party may be an internal auditor, senior accountant or any other employee of the organization. Management assertions will therefore help an auditor in carrying out the audit and form an opinion. The procedures provided in ZZZZ Best are used as audit evidence and should provide an auditor with reasonable assurance that financial statements are not materially misstated. Management assertions may be faced by limitations mainly caused by the client.
Beasley and Roger (1997) notes that limitations to the procedures for management assertion include: inability to quantify some information, dishonest among the third parties, use of much estimation in financial statements and exclusion of restoration sites that may be or would have been more appropriate to visit in regard to the audit. In addition, the visitation of restoration sites may have been biased. It is also difficult for an auditor to decide on which tests are appropriate or not to assess the risk associated with such information or procedures.
In auditing there is high...