You have accepted the engagement of auditing the financial statements
of the C. Reis Company, a small manufacturing firm that has been your client for
several years. Because you were busy writing the report for another engagement, you sent
a staff accountant to begin the audit with the suggestion that she start with accounts receivable.
Using the prior year’s audit documentation as a guide, she prepared a trial balance
of the accounts, aged them, prepared and mailed positive confirmation requests, examined
underlying support for charges and credits, and performed other work she considered necessary
to obtain evidence about the validity and collectability of the receivables. At the conclusion
of her work, you reviewed the audit documentation she prepared and found she had
carefully followed the prior year’s audit documentation.
The opinion rendered by auditors states that the audit was made in accordance with generally
accepted auditing standards. Identify the important components of the performance principle and relate them to the audit of C. Reis Company by indicating how they were fulfilled
or, if appropriate, how they were not fulfilled.