The Lakeside Company: Auditing Cases SOLUTIONS MANUAL 11e

(1) The staff auditor performs many of the detailed audit procedures, such as preparing and controlling accounts receivable confirmations. In general the work of the staff auditor is controlled by audit program and supervised by the senior auditor The senior auditor coordinates the audit at the client's location and performs many of the more difficult audit procedures, such as analytical review procedures. Usually the detailed work performed by the audit senior is more sophisticated and requires the experience gained by someone holding that rank. The audit senior is supervised by the manager. The manager and the partner have supervisory roles. Managers and partners often have more than one audit team under supervision at any given time. The partner is the person who has responsibility for determining whether the firm’s signature can be attached to audit report. (2) The partner-in-charge of an audit is the definitive decision-making position on the audit team. Although the manager and senior auditor make several decisions, they must get ultimate approval from the partner-in-charge of the audit. The consulting partner's role is to add a further degree of objectivity to the audit. The consulting partner reviews and critiques certain crucial decisions made by the audit team, such as the final audit report. The partners should be rotated to assure independence. Sarbanes-Oxley (SOX-S203) requires the identification of a Leading Partner and a Reviewing Partner. Both partners must be rotated every five years. (3) An accounting firm is a business like any other, and its management must recognize that a marketing strategy is probably necessary to generate a continual flow of sufficient operating revenues. However, in the accounting profession, disagreement exists as to the extent that such marketing should take. In the past, overt marketing was not permitted since it was considered to be unprofessional. This position was supported based on the reasoning that a firm 6 should be selected based solely on the quality of its service. No reliable system existed, though, for conveying such information to potential clients. Hence, firms with many clients tended to remain large, while smaller firms often found growth to be nearly impossible. In the free market system espoused by the United States, restrictions on such practices as advertising and solicitation were inevitably overturned. Over the past three decades, attitudes toward marketing have changed dramatically as competition has become much more intense. Advertisements by CPA firms in newspapers and magazines are now common. Newsletters such as that distributed by Abernethy and Chapman are also frequently used to increase a firm's name recognition in the business community. In the current world of business, some type of marketing strategy seems imperative if an accounting firm is to compete. Whether that marketing should extend to formal advertising is often a question of firm policy. Most importantly, the firm must ensure that potential clients know of its presence and the services that it offers. A client will probably not select a CPA firm based on advertising. However, the client may initially become aware of the firm only through some type of marketing. Interestingly, some members of the accounting profession view marketing as having had a negative impact on the profession as a whole. Price competition for new clients is often associated with the marketing of a firm. These critics assert that lowered fees result in sloppy and hurried audit work that can decrease the overall reputation of the profession. [Additional resources discussing this issue can be found in the "Suggested Readings" at the end of this case.] (4) A national or international CPA firm might consider acquiring Abernethy and Chapman