Smart Investments Limited :
Ted is the manager and Carl is the partner on the audit of Smart Investments Limited
Smart Investments Limited trades its shares of stock on the NASDAQ exchange Smart Investments Limited
Auditor Issues :
The auditors don’t believe that the CEO, CFO, and directors want to go along with their advice
Smart Investments does not want negative news to upset the price of their stock Auditor Issues
Disclosure Issues :
Rules call for segmented disclosure of significant lines of business
The company has made 55% of its profit through trading of derivative securities
This is risky and the company does not fully disclose the profit is coming from this Disclosure Issues
Disclosure Issues :
There is a potential lawsuit by their client, Bonvest Mutual Funds for messing up orders
It should be in the Contingent Liabilities note but Smart does not have it there Disclosure Issues
Subsidiaries :
The statements include the accounts of the parent and four subsidiaries
One subsidiary, Caribbean Securities is in bad shape
There is no qualification on the audit opinion of this subsidiary Subsidiaries
What should Carl do? :
Carl should make his judgment not based on what Smart wants
Carl should disclose the significant trading of derivative securities
Carl should disclose the potential lawsuit and the struggling subsidiary What should Carl do?
Conclusion :
These issues are very important factors to understand a business
This key information needs to be disclosed so investors know what is really going on
Investors would be deceived if they did not know this vital information Conclusion