Essay about Interim Financial Information

1812 Words Jul 8th, 2013 8 Pages

1. Is David Robinson suggested compromise appropriate? Why or why not?

2. Do you believe that Zachariah Crabtree is a person of integrity? What about David Robinson? Defend both of your answers. Does Robinson have an impropriate relationship with Crabtree? Explain.

3. Identify the primary audit objectives for client’s year-end discretionary expense accruals. Is it permissible for companies to overstate period-ending expense accruals to make their financial statements more “conservative”?

4. Discuss the scope and nature of an auditor’s responsibilities during a review of client’s quarterly financial statements.


The American Institute of Certified Public Accountants is a
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There is pressure, opportunity and realization that will allow financial statement to be material and mislead financial users. Also, there is close friendship relationship. Robinson is grateful to Crabtree for his patience and willingness to explain the complex accounting issues. Moreover, Robinson often feels as he is employee rather than an independent auditor. He validated the second general standard of Generally Accepted Auditing Standards that in all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor which in Robinson case is not met. Moreover, the AU Section 220 states that the auditor should be without bias with respect to the client under audit, again Roberson and Crabtree are friends and collusion is possible. As auditors we have to know how to keep our independence and professional obligations separate from a friendship. Arguments and disagreements will exist but auditors have to make sure that they keep their integrity, objectivity, and independence.

In accounting, the term "accrual" refers to a journal entry where a revenue or expense item is recorded in the absence of an actual cash transaction. Discretionary expenses are non-essential expenses that take place to promote or enhance the company’s standing with its customers and employees.
The primary audit objective for client year-end discretionary expense accruals is stated in AU Section 342. AU 342 paragraph 4 states

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