a. Information gathering and analysis: What factors should Leo & Lee consider when deciding whether to use the Brazilian accounting firm? (Refer back to the section “Using the Work of Another Auditor” in Chapter 5 when preparing your answer.)
b. Information gathering and analysis: What are the responsibilities of the Leo & Lee partner on the MSI audit as they relate to the Brazilian accounting firm? (Refer back to the section “Using the Work of Another Auditor” in Chapter 5 when preparing your answer.)
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c. Conclusions: Draft the for MSI assuming an unqualified opinion based in part on the work of another auditor. (Access AS 1205 at www.pcaobus.org to see an example report.)
Mobile Security, Inc. (MSI) has been an audit client of Leo & Lee, LLP for the past 12 years. MSI is a small, publicly traded aviation company based in Cleveland, Ohio, where it manufactures high-tech unmanned aerial vehicles (UAV), also known as drones, and other surveillance and security equipment. MSI’s products are primarily used by the military and scientific research institutions, but there is growing demand for UAVs for commercial and recreational use. MSI must go through an extensive bidding process for large government contracts. Because of the sensitive nature of government contracts and military product designs, both the facilities and records of MSI must be highly secured.
In October 2022, MSI purchased a small company in Brazil, Jungle Max, that manufactures small, unmanned vehicles that can maneuver through jungle terrain. The subsidiary represents 15% of MSI’s assets on the consolidated financial statements. For the last 20 years, Jungle Max has been audited by a Brazilian accounting firm. After meeting with representatives from the Brazilian firm and researching the firm’s history, Leo & Lee decide it would be most efficient to have the Brazilian firm continue to audit Jungle Max. Therefore, for the audit of MSI for the year ended June 30, 2023, the Brazilian firm conducted the audit of Jungle Max.