Reference no: EM131222555
You and a client are carrying on a heated debate about the public accounting profession. During the course of the debate, the client makes a number of statements that you believe are in error, which are listed below.
a. Auditing neither creates goods nor adds value to existing goods and therefore does not add value to the business. Auditing exists only because it has been legally mandated.
b. The only reason I would hire an auditor is to detect fraud that might exist in the company. Searching for fraud should be the primary responsibility of the auditor.
c. Auditors will never be able to add significant value to financial statements since generally accepted accounting principles (GAAP) allows for different methods to be used to account for the same transaction. How can the auditor issue the same opinion on identical companies when one uses LIFO for inventory valuation purposes and the other uses FIFO for inventory valuation purposes.
d. Auditing is nothing more than the accountant nitpicking through the accounting records to find mistakes to justify his/her fee. Accountants ought to get real jobs in a business where they actually have to make recommendations to improve the operations of the business.
e. The auditor's report states that transactions are examined onlyon a test basis. Therefore, you must treat the results of the audit as stated in the auditor's report with a healthy amount of skepticism.
REQUIRED: For each of the statements made above, develop a brief response to the client, indicating the errors in the statement or assumptions made by the client, or your reason for agreeing with the client. Provide relevant support for your response.
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