Accounting

World has changed means that in the modern world the accounting  auditing standards and practices have become more stringent requiring the controllers (companys management) and the auditors to present compliance to those standards and practices. These revised accounting standards require more detailed and extensive disclosures for amounts appearing in the financial statements of a company. The modern world practices has also brought in more established and modernized audit practices requiring an auditor to carry out their work critically and objectively, while incorporating a sense of unpredictability in their work when carrying out audits. This includes using audit techniques and methods established to verify the accuracy of the amounts that assist the auditor in their work.
Further, several audit techniques and tools have been established to help the auditors in identifying the red flags during the audit. Involvement of the forensic experts, fraud risk examiners (with the companys consent), SOX and COSO requirements regulating the controls of an entity make it difficult for perpetrator to commit any type of financial statement fraud.
Q15
 True and fair view states that the amounts and the information presented in the financial statements are factual, the transactions were actually entered in to, the assetsliabilities reported in the financial statements exist and are disclosed and valued properly and are in conformity with the accounting records maintained by the company prepared in accordance with the accepted accounting principles.
 Present fairly encompass presentation of information and amounts in the financial statements that is in accordance with the accounting principles and standards as referred to in expression, true and fair view.
Both the above statements recognize situations in which there may be events or transactions that are not addressed by any specific standard or accounting principle, in such circumstances the said event or transaction shall be dealt under an accounting standard or principle that deals with similar events or transaction under the given circumstances.
The underlying concept in both the statements revolves around the applicability of an acceptable framework to the transactions entered by the entity supported by original books of accounts to evidence the occurrence of all such events and transaction, hence, there is no significant difference between the two statements.
Case 5-9
Q1
The deficiencies  amendments in the audit report are marked in square brackets  as under
Introductory paragraph
Line 1 retained earnings and cash flows for the year ended..
Scope paragraph
Line 1 and 2 in accordance with generally accepted auditing standards prepared by the American Institute of CPAs standards of the Public Company Accounting Oversight Board (United States)
Line 4 includes examining on a test basis, evidence supporting.
Line 6 significant estimates that we made made by management as well as.
Opinion paragraph
Line 1 present fairly in all material respects the financial position.   
Line 2 of its operations and its cash flows for the..
Line 4 and 5 principles established by the Financial Accounting Standards Board generally accepted in the United States of America.
Date of the audit report
The date mentioned on the audit report is the date of the year-end covered by the financial statements. However, the date of the audit report should not be earlier than the date on which the auditors of the company have gathered sufficient audit evidence to form a suitable basis for their opinion.
Q2
Though Miss Hawkins have been posted to another audit client but the principles of Professional Responsibility  in the AICPA Code of Professional Conduct does not restrict communication between members of the engagement team until the audit is finalized, i.e report is issued to the client.
Q3
Accounting issues that foster should have considered before making the statement would be
The inventory should properly valued in the financial statements i.e. all the items included in the inventory should be carried at the lower of the total cost and the price they are expected to be sold in the market (Net Releasable Value)
Materiality of the amount of the inventory as compared to financial statements taken as a whole.
Q4
Additional steps that could have been taken in the situation that inventory at Boston was never observed may include
Obtaining details relating to cyclic counts of the inventory performed by the management.
Performing steps to check any differences in the cyclic accounts and actual inventory have been identified and adjusted in a proper way.
Checking whether there is any formal plan for the counting of inventory on a periodic basis and inquiring from the management if it follows the program actively.
A qualified opinion would be appropriate given the fact that the auditor is unable to obtain sufficient evidence relating to the marketability of inventory. Given the limited facts, it is not clear if the amount of the inventory is material to the financial statements or if the inventory couldnt be counted due to auditors own negligence, therefore a qualified opinion would be appropriate. However if the amount of the inventory is material the auditor should disclaim an opinion .
Q5
If the audit report is issued without making any adjustments the firm of Johnson  Garson would be violating the following rules in the AICPAs code
Rule 501-4 Negligence in the Preparation of Financial Statements or Records
Rule 102-1 Knowing misrepresentations in the preparation of financial statements or records.
Rule 201 General standards (Due Professional Care and Sufficient Relevant Data)