Reference no: EM133360218

Case: You are the quality control partner for Audrey, Angela, and Andrea (A3). You are reviewing the audit files for BorAm Mining Consolidated, a new client. The president of BorAm, Lydia Kohls, is the sister-in-law of Andrea, a senior partner with the firm.

BorAm has recently had some very positive test results from a mineral claim in northern Quebec and needs to approach the capital markets for financing to open a gold mine. Lydia decided that the capital markets would be more likely to provide the funding if a large, national audit firm signed the opinion. Accordingly, she approached Andrea in late November about A3 taking over their audit from the small local firm that had done the audit in past years.

Andrea reviewed the January work schedules of the audit staff with the audit managers and determined that the audit work could be properly planned and performed. After a discussion with the other senior partners, A3 accepted the assignment and assigned Angela as the audit partner so that there was no independence issue with Andrea.

The fieldwork has been completed by the audit staff, and Angela has completed her check. Internal controls were documented, and control risk was assessed as low. A meeting with BorAm has gone well, and all proposed adjusting entries have been accepted by the client, except a write-off of exploration expenses for another site. BorAm treats each mineral claim as a project and will drill several test holes at each claim site. Drilling has not yet completed at this other site, so BorAm is unwilling to say it is unsuccessful even though the results do not suggest a mine would be economically feasible. The write-off is just over materiality. Angela did consult with other A3 partners and decided that since the amount was close to materiality and the accounting was unclear, and she would not force the adjustment. She is recommending an unmodified (clean) opinion.

You have the audit files in front of you, which consist of the planning file, the administrative file, and the audit evidence file. The planning file contains a lot of suggestions to improve next year's work. The level of the audit staff and the time documented in the administration file is within reason, and the letters to the client are complete and have been signed. The substantive year-end work in the evidence file meets the usual high-quality work of A3.

The only thing needed now is your quality review of the work before Angela signs the opinion.

Required

An analysis for the quality review of the work.