Explain whether the audit reports should be used to solicit investments, or sales, and explain the ways a CPA (certified public accountant) could prevent Person JB’s behavior.
Explanation of Solution
The main purpose of audit reports is to provide reasonable assurance to the investor that the company’s financial data is reliable. As per the authoritative pronouncements, there is no restriction to use audit reports unless the information is not found misleading. In the given case, JB has used the audit reports as a general marketing tool to solicit investments, or credits, or sales. This practice could be acceptable as long as the information is real.
The CPA does not use the audit reports to create chaos or fears among the investors and customers. But CPA could ward off the impending damages by holding talks with the clients and make them understand the purpose of audit reports; or conveyed restrictions through the engagement letter.
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Chapter C2 Solutions
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