Two Couples Shared Holidays Reply To The Post

Two Couples Shared Holidays Reply To The Post

Two Couples Shared Holidays Reply To The Post

Drew Bergman was the audit senior manager during his three-year tenure at BDO Long Island office, Tsai according to the case study worked on roughly 20 engagements that Bergman spearheaded. Moreover, Bergman’s and Tsai working relationship was further solidified by their personal relationship as she was very good friends with Nany Bergman (Drew’s wife) who also worked at BDO. Over the years the two couples shared holidays together and their children visited one another frequently. We can observe that the inventory in transit was a major concern for the audit team and it took them a month or so to accept management assertations along with performing additional tests. For example, BDO performed varies mathematical tests, examined the expense report of the truck driver, and discussed the inventory transfer with the controller among other audit procedures.

In the recent discussions we have talked extensively about the importance that the auditors maintain their independence in a financial statement audit. Independence means that the auditor has not had any undue influence on its findings. For example, the auditor has no pressure to provide a “clean” opinion. According to SEC rules, the general standard of auditor independence is that it is impaired if a reasonable, fully informed investor would conclude that the auditor is not capable of exercising objective and impartial judgment on all issues encompassed within the audit engagement.

Albeit, Drew at least in the readings never directly asked Tsai to look the other way as an investor hanging on every word of the SEC general standard of auditor independence; I would conclude she was incapable of making an objective decision on HMI’s financials. To this extent, some of the vulnerabilities that may develop because of trust through a working relationship:

  • The issuer having undue influence over the audit, because of the previous working relationship. This will impact the independence of the audit
  • The breaking of the professional relationship between the client and the auditor, because of the previous relationship.
  • The auditor learning about additional information outside of the scope of the audit.

SOURCES TO USE

see attached