Donald Trump the owner of a large manufacturing company, asked Joe Biden, a partner in a small audit firm (J&B Ltd), to audit the company’s records. Donald told Joe that the audit was to be completed in time to submit an audited financial report to a bank as a part of a loan application. Joe accepted the engagement immediately and agreed to provide an auditor’s report within 2 weeks. Joe hired three accounting students to conduct the audit and spent several hours telling the exactly what to do. Joe told the students not to spend time reviewing the controls or the business environment but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarising the data in the accounting records that supported Donald’s financial report. After three weeks, the students followed Joe’s instructions and gave Joe the financial report, which did not include footnotes. Joe reviewed the financial reports and prepared an unmodified report indicating that, in his opinion, the financial report gave true and fair view. The working papers did not refer to acceptable accounting policies or compliance with relevant regulations and statutory requirements. Required: Explain whether you consider that Joe Biden (J&B) exercised “reasonable care and skill” and was negligent. Justify your answer by citing relevant case law. (Please correct answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Donald Trump the owner of a large manufacturing company, asked Joe Biden, a partner in a small audit firm (J&B Ltd), to audit the company’s records. Donald told Joe that the audit was to be completed in time to submit an audited financial report to a bank as a part of a loan application. Joe accepted the engagement immediately and agreed to provide an auditor’s report within 2 weeks. Joe hired three accounting students to conduct the audit and spent several hours telling the exactly what to do. Joe told the students not to spend time reviewing the controls or the business environment but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarising the data in the accounting records that supported Donald’s financial report. After three weeks, the students followed Joe’s instructions and gave Joe the financial report, which did not include footnotes. Joe reviewed the financial reports and prepared an unmodified report indicating that, in his opinion, the financial report gave true and fair view. The working papers did not refer to acceptable accounting policies or compliance with relevant regulations and statutory requirements. Required: Explain whether you consider that Joe Biden (J&B) exercised “reasonable care and skill” and was negligent. Justify your answer by citing relevant case law. (Please correct answer

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