John C. Beale was a senior policy advisor with the U.S. Environmental Protection

Question

John C. Beale was a senior policy advisor with the U.S. Environmental Protection Agency. In late 2013, however, he was sentenced to prison for stealing close to $900,000 in taxpayer funds. According to Marimow and Bernstein (2013):
Beale had skipped out on work for years by telling a series of supervisors … that he was doing top-secret work for the CIA. He was paid for a total of 2½ years of work he did not perform since early 2000 and received about $500,000 in bonuses he did not deserve, according to his plea agreement. He lied about contracting malaria to obtain a reserved parking space that cost the EPA $8,000 over three years. He took trips to visit his family in Los Angeles for which he charged the government more than $57,000.
- The Audit Clarity Project standards apply to financial statement audits. Using Table 17.1 as a guide, prepare a memo that summarizes Beale’s case. (25 pts)

Explanation / Answer

INDEPENDENT AUDITOR’S REPORT

TO

THE BOARD OF DIRECTORS

U S Environmental Protection Agency

....................................

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of U S Environmental Protection Agency (“the Company”), which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the generally accepted Auditing Standards (GAAS).

This responsibility also includes maintenance of adequate accounting records for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these Standalone Financial statements based on our audit.

We have taken into account the generally accepted Auditing Standards (GAAS) and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the the generally accepted Auditing Standards (GAAS). Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2013, and its profit/loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

We report that:

      FOR ...............................(AUDITOR FIRM NAME)

      FIRM NO

      PARTNER

      PARTNER NAME

Place of Signature:

Date:

EXPLANATION

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