Chapter 9, Problem 47FF

a.

To determine

Introduction:A contingency is an event occurrence of which is not certain, in terms of revenue recognition, a contingent sale should not be recognized without providing for a provision against non-fulfillment of conditions on which the sale was based.

To evaluate: The critical mistake ofMr. Pin review of Q1 of 1997 and its impact on willingness of auditor to take action in later period.

b.

To determine

To describe: The factors that motivated Mr. P to act as he did.

c.

To determine

Introduction:

Audit committee: It is a group consisting of board of directors of the company who are responsible to supervise the financial reporting process and audit function undertaken within the organization. This committee or group does the function of selecting the auditor and review the audit report to ensure adherence financial accountability.

To describe:The elements related to corporate governance which failed in the H’s situation.

d.

To determine

Introduction:

Confirmation letters: A confirmation letter is an audit tool that involves communication between the auditor and a party which is associated with the auditee, this is a form of external confirmation through which the auditor aims to confirm the balances presented by auditee by reaching out to the party against whose name the balance is presented by auditee.

To evaluate:Errors done by audit team in the confirmation process of year ending 1997.

e.

To determine

Introduction:

Accounting principles: These are the rules and guidelines that have to be followed by the companies at the time of financial reporting.

To describe:The course of action that Mr. P required to enable us to do the right things at the time of the acquisition process and alert the concerned parties regarding the default in accounting practices.