Contemporary Auditing - Assignment Example

Q2: Crawford auditors should take categorical measures not to permit the client to discover the materiality threshold that are to be applied in the audit. There exists unethical clients in the world. If the employees or management discover that the materiality threshold to be applied, they can use it to manipulate the system, accounts, or records because they will be aware of what the auditors are looking for in the documents and system. Arguably, it is no feasible for the auditors to hide the set threshold information, particularly when they are dealing with physical records.

In the audit process, the auditors often engage the clients to assist them with various tasks, such as pulling records. If the auditors over rely on the client’s information and documents, it becomes very difficult for the auditors to detect material errors. Q3: The SFAS No. 48 “Revenue Recognition When Right of Return Exists,” and the Concept Statement No. 5 of the FASB “Recognition Measurement in Financial Statements of Business Enterprises” are the leading guidelines informing firms when they are entitled to record revenues (Knapp, 2012).

Equally, revenue recognition should be based on accrual accounting in line with the GAAP. Revenue should be recognized when earned, irrespective of the cash receipt timing. Progressive payments, early payments, and deposits are not recognized as revenue until the revenue transpired. Q4: Auditors have the principal objective of attaining a meaningful assurance that the audited financial statements do not have material mismanagement (AU200-12) (.Knapp, 2012). When Deloitte altered the audit evidence, they implied that the conclusion that was presented by the original audit was no longer supported.

Question 5: Incompetency with the management team increases the probability of inherent risks within the audit. Hence, auditors have to evaluate the possibility of the management team recognizing mistakes in the audit. Incompetent management teams necessitate greater audit procedures in overall due to the high probability of inherent risk.