Laural Valley
Jay Kent Newby failed to conduct the attest engagement in a professional manner. Instead of storming into Trout’s office and interrupting his meeting with his secretary, he should have prepared and issued written documentation stating the results of his procedures as well as the conclusion he reached. This is supported by the accounting literature AT101.66, which says the practitioner must state his conclusion about the subject matter evaluated in a written report. Jay Kent Newby came to the conclusion that the partnerships records were fraudulent, that Claude Trout had squandered away most of Moore’s initial cash investment, and that Mr. Trout had failed to correctly record his original partnership investment. Newby failed to support his conclusion with sufficient evidence and also falsely accused Mr. Trout of wrongdoing. ET201.01 states that members must obtain sufficient relevant data to afford a reasonable basis for conclusions. Newby concluded that Trout squandered exorbitant amounts of cash to contractors, which may have been Trout’s relatives; however, Newby fails to provide evidence to support his conclusion. AT101.21 requires the practitioner to have adequate knowledge of the subject matter. Jay Kent Newby did not have adequate knowledge of the subject matter, or he would not have falsely accused Mr. Trout of not contributing the property to the partnership, which he did so correctly.
If Jay Kent Newby had not been a CPA at the time, both Newby & Company as well as Jay Kent Newby would be in violation of multiple standards. Jay Kent Newby would lack the required knowledge and education to complete the engagement, which is required according to AT101.21. Newby & Company would be responsible for the overall outcome of the audit and would be responsible for the false accusations made by Jay Kent Newby.