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Ray, the owner of a small entity, asked Holmes, CPA, to conduct an audit for the entity's record. Ray told Holmes that the audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Holmes immediately accepted the engagement and agreed to provide an auditors' report within three weeks. Ray agreed to pay Holmes a fixed fee plus a bonus if the loan was granted.

Holmes hired to accounting students to conduct the audit and spent several hours telling them exactly what to do. Holmes told the students, not to spend time reviewing the to concentrate on proving controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and on summarizing the data in the accounting records that support Ray's financial statements, the students followed Holmes' instructions and, after two weeks, gave Holmes the financial statements, which did not include footnotes. Holmes studied the statements and prepared an unmodified auditors' report. The report, however, did not refer to generally accepted accounting principles or to the fact that Ray had changed to the accounting standard for capitalizing interest.

Requirement: use two columns with the first column showing the standards which are right below and the second column indicating if the standard has been violated.

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