Part 1
During the audit, the following occurred:
Bovar Company’s management restricted the auditors by not allowing them to audit Overall Manufacturing Company’s financial statements. Management changed the inventory accounting from first in, first out (FIFO) to last in, first out (LIFO) and did not accurately revalue the inventory. The lead auditor was the cousin of Bovar Company’s chief financial officer (CFO).
The American Institute of Certified Public Accountants (AICPA) professional standards provide uniform wording and format for the audit report. Consider the above events and write a 1-page audit report for Harrison that includes all 7 parts of a standard audit report, as follows:
Report title
Audit report address
Introductory paragraphs
Scope paragraph
Opinion paragraph
Name of the Certified Public Accountant (CPA) firm
Audit report date
Part 2
At the end of the audit, the audit team completed the fieldwork and signed the auditor report on March 20, 2014. Harrison sold some of assets in the rectangular heat exchangers line on March 31, 2014. The team is concerned about this event transaction occurring after December 31, 2013 that may affect the 2013 financial statements. Discuss the following questions in a 1-page document:
What general types of subsequent events require consideration and evaluation by the management and the audit team?
Describe the financial statement effect of the subsequent event that is described above.