EssayClub.com - Free College Essays and Term Papers

Accounting Audit Project - Avion Inc.

Audit of Avion Inc. by Kenneth Rush and Associates CPA firm – October 2005
Kenneth Rush and Associates (KRA) has been engaged to perform the audit of Avion, Inc. Avion is a new airline with a fleet of 50 airplanes. This is small by industry standards. The airline flew more than 50 million passengers to 30 cities in the U.S., with almost 500 daily departures. Avion has annual revenues of $115M and approximately 3,000 employees. The company has a reputation for prompt and efficient service. This high level of quality has won them many loyal customers.
I am a member of the audit team for this engagement. The audit team has reviewed the financial statements. There is one concern. While auditing the accounts we have observed an undue increase in the amount of legal fees paid in the current year. Our concern is that all legal liabilities have not been properly disclosed. We believe we are not meeting two audit objectives:
1) Completeness - all disclosures that should have been included in the financial statements have been included.
2) Accuracy and valuation – Financial information is appropriately presented and described and disclosures are clearly expressed.
An external consultant, Renee De Gaulle, was hired by KRA for her expertise in the industry. She concluded that management was cooperative and she found no discrepancies in their records. Kenneth Rush, the Managing Partner at KRA, has suggested some standard auditing steps for us to perform. Based on his suggestions, and his prior experience, we developed six steps for our legal verification process:
1) Confirm the existence of pending litigations. Ask the legal department to provide all correspondence with attorneys, and to provide copies of all legal invoices.
2) Conduct a management inquiry. Meet with members of management to discuss all discrepancies on the financial statements, company policies, and control procedures.
3) Inspect all litigation papers. These include all court papers, legal settlements,...