Part -1:

Mr. Cheatem, a Mid-level Partner of the CPA firm Dewey, Cheatem, & Howe (DCH), after noting that after declining for decades, the limits on Auditor liability have over the last few years been rising.

Required:

Mr Cheatem wants to know why this reversal has occurred and what are the implications for his firm?

Please review the social role of external auditing and the implications of auditor liability caps on auditing in general and for DCH.

Also, please review and incorporate the web site http://www.clmr.unsw.edu.au/article//institute-of-chartered-accountants-stripped-of-liability-cap into your answer.

Please be brief, polite, and considerate in your answer.

Part -2:

Mr. Howe, a Junior Partner of the CPA firm Dewey, Cheatem, & Howe (DCH), wants you to combine and discuss the following issues into a single coherent 1½ page training memo for new audit assistants:

1) Audit risk is a key consideration and guide to planning an audit - explain why?

2) List the key components of the Audit Risk Model (ARM) and discuss how they interact?

3) How can well-structured or judicious statistical sampling cost-effectively assist with estimating the components of the Audit Risk Model and/or resolve an unsatisfactory outcome of that model? and

4) Discuss the key strengths of and key differences between random sampling, haphazard sampling, and judgement sampling and how those differences might affect the discussion in part 3.

This memo is to be answered in groups of 3-6 students, where each group will submit one report with the names and student numbers of all group members in the heading. The assignment is due in lecture, week 12. The marking rubric that will guide the marking is posted to the assignment section of the HI5026 Blackboard site.