Aicpa Case Study

AICPA The role of the external auditor is to identify items that might be causing DOW’s transfer of financial assets account to somehow make their financial statements materially misstated by designing and executing auditing tests. As I stated before DOW trades accounts receivable with many third party clients and conduits, in effect making the transfer of financial assets section of their company to be very complicated and susceptible to fraud. When an auditor is approached to complete an audit of DOW’s transfer of financial assets, there are a few steps that need to be taken in order for the auditor to protect himself. The auditor needs to learn about DOW and its environment, assess the risk of material misstatement and look into designing and planning audit procedures needed to complete the …show more content…
The auditor should look the most recent financial statement and should ask for DOW’s permission in order to contact the pervious external auditor. (SAS No.122 AU-C 510 paragraphs .06 and.07) Another thing that the new auditor needs to prove is his independence in relation to DOW; the auditor needs to obtain relevant information proving he is not related in anyway to DOW or its clients. (SAS No.122 AU-C 220 paragraph .13(a)) The auditor has to determine if he wants to choose to accept and continue the engagement with DOW based on the documents he was given and the research he had done and the level of difficulty he is willing to accept while continuing his due professional care before he agrees to the audit. (SAS No.127 AU-C 600.25 paragraph .14) The agreement on audit engagement term is a document listing the scope of the audit, responsibilities of the auditor and the management and the limitation that might arise. (SAS No.122 AU-C 210 paragraph