PROSPECTUS FOR AUDITORS' REPONSIBILITIES - THE REPORT OF THE COHEN COMMISSION

• NCJ Number: 66536
• Journal: Management Accounting Volume: 50 Dated: (MAY 1958) Pages: 19-24,29
• Author(s): H R JAENICKE; P A MCCONNELL
• Date Published: 1978
• Length: 7 pages
• Publication Format: Article
• Language: English
• Country: United States of America

Annotation

THE INDEPENDENT AUDITOR'S REPORT AND THE MANAGEMENT REPORT PROPOSED BY THE COMMISSION ON AUDITORS' RESPONSIBILITIES OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ARE PRESENTED AND DISCUSSED.

Abstract

THE PROPOSED AUDITOR'S REPORT IS OFFERED IN THE BELIEF THAT THE CURRENT TWO-PARAGRAPH REPORT IS MERELY A SYMBOL THAT COMMUNICATES LITTLE TO THE READER. THE RECOMMENDED REPORT FORMAT INCLUDES A SPECIFICATION THAT THE FINANCIAL STATEMENTS ARE THE REPRESENTATIONS OF MANAGEMENT. THIS INDICATES THAT THE AUDITOR IS RESPONSIBLE FOR JUDGING THE PREFERABILITY OF ALTERNATIVE ACCOUNTING PRINCIPLES IN CIRCUMSTANCES WHERE MANY AUDITORS CURRENTLY DISCLAIM SUCH RESPONSIBILITY. ALSO, IT MAKES EXPLICIT MANY OF THE IMPLICIT PRESENTATIONS IN THE CURRENT STANDARD REPORT. ALTHOUGH THE STUDY AND EVALUATION OF INTERNAL CONTROL ARE CURRENTLY IMPORTANT ASPECTS OF AN AUDIT, SUCH AN EVALUATION MAY EXCLUDE CONTROLS THAT ARE NOT USED IN DETERMINING THE NATURE, EXTENT, AND TIMING OF OTHER PROCEDURES PERFORMED BY THE AUDITOR. THE PROPOSED REPORT REQUIRES AUDITORS TO BE CONCERNED WITH ALL CONTROLS THAT HAVE SIGNIFICANT BEARING ON THE PREVENTION AND DETECTION OF FRAUD. WEAKNESSES IN INTERNAL ACCOUNTING CONTROLS, FINANCIAL INFORMATION OTHER THAN THAT CONTAINED IN THE FINANCIAL STATEMENTS, INTERIM FINANCIAL INFORMATION, AND MATTERS PERTAINING TO THE AUDITOR'S RESPONSIBILITY FOR THE DETECTION AND DISCLOSURE OF ILLEGAL OR QUESTIONABLE CORPORATE ACTS ARE ALSO ASPECTS OF THE PROPOSED AUDITOR'S REPORT. THE PROPOSED MANAGEMENT REPORT ADDRESSES THE REASONABLENESS OF THE SYSTEM OF INTERNAL CONTROLS AND SUMMARIZES THE ACTION THAT THE COMPANY HAS OR HAS NOT TAKEN REGARDING RECOMMENDATIONS FOR IMPROVING INTERNAL CONTROLS. THE RELATIONSHIP BETWEEN THE COMPANY AND ITS ATTORNEY REGARDING LITIGATION, CLAIMS, AND ASSESSMENTS IS ALSO INDICATED. SAMPLES OF MANAGEMENT AND AUDITOR REPORTS CONTAINING MANY OF THE COMMISSION'S RECOMMENDATIONS ARE PROVIDED. OTHER CONCLUSIONS OF THE COMMISSION AND THE IMPLEMENTATION OF THE RECOMMENDATIONS ARE ALSO BRIEFLY DISCUSED. (RCB)