Dhananjay 21667 April 3, 2011 a) For the banks approval a review is important in order to assure the bank on the

e accuracy and fairness of the financial statements based on the generally accepted accounting principles. A review is less intensive as compared to an audit. It is likely that the bank was looking for basic assurance which is why it opted for a review. It might be of importance for the bank to know of the CPAS standing and reputation in order to build sufficient trust on the review report of the CPA.

b) Since the bank might be looking for higher assurance level for which auditing would be the best option. Auditing is more intense than a review of the financial statements. This would definitely allow the bank to build more trust on the company and the company itself couldve asked for a reduction in interest as the risk to the bank would further reduce.

c) Unless the CPA firm invested in the shares of the company, the independence of the auditing firm is not impaired. Judgments on independence can also be made based on other services like tax and business advices provided to the company by the CPA firm.

d) To provide audit and review services the company hired external auditors Abdullah and Elhakeem. Abdullah and Elhakeem provide assurance and a comfort level to the stockholders, creditors and management by issuing there view and opinion on the unbiased presentation of the financial statements. By having an external auditor do the audit for the company, the company gains the confidence of the stockholder and its creditors as the right financial information is available for them to do their research on the progress of the company. The reports generated by the auditors often are confined to the general rules and regulations of accounting and hence provide assurance to the stakeholders of the company.

e) The major duty of an auditor is to check and reconcile that the internal financial statements of the company are free from fraud and errors. The reports generated by the auditors often are confined to the general rules and regulations of accounting and hence provide assurance to the stakeholders of the company that there is no misleading of information by the company. For the auditors to do the audit they must have enough evidence on hand that the financial statements are free from any fraud or error. For example reconciling with the bank statement and the proof of stock in hand and sold.