CPA Is a Partner in a Medium-Sized CPA Firm and Takes

question 17

Essay

CPA is a partner in a medium-sized CPA firm and takes an active part in the conduct of every audit she supervises.She follows the practice of reviewing all audit files of staff auditors on her team as soon as it is convenient,rather than waiting until the end of the audit.When the audit is nearly finished,Thompson reviews the audit files again to make sure that she has not missed anything significant.Because she makes most of the major decisions on the audit,there is rarely anything that requires further investigation.When she completes the review,she prepares a draft of the financial statements,gets them approved by management,and has them assembled in her firm's office.No other partner reviews the audit documentation,because Thompson is responsible for signing the audit reports. REQUIRED: (1)Evaluate the practice of not having a concurring partner review of the audit documentation by another partner in the firm, (2)explain some of the procedures the reviewer should perform as part of the review process,and (3)what documentation should be included.

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Definitions:

Statement of Income and Expense

A financial document that summarizes revenue and expenses over a specific period, showing net profit or loss.

Profitability

The financial metric that measures the degree to which a business or activity yields profit or financial gain.

Quarterly Return

The Employer’s Quarterly Federal Tax Return, a form submitted to the IRS every 3 months that summarizes the federal income and employment taxes withheld from employees’ paychecks.

Revenue

The total income generated from goods sold or services provided by a business, which can be before or after any deductions are made.