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Solutions Manual, Chapter 2, Page 2 of 14
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written
consent of McGraw-Hill Education.
United States GAAP or IFRS. It is important to an audit because it is through consideration of that
framework on which the auditor basis his or her opinion on the financial statements.
2-4 Generally accepted auditing standards are the Statements on Auditing Standards issued by the
Auditing Standards Board.
2-5 In the context of the audit of financial statements, professional skepticism includes maintaining a
questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or
error, and a critical assessment of audit evidence. Throughout the audit the auditors should be alert
for: (1) audit evidence that contradicts other audit evidence, (2) information that raises a question
about the reliability of documents and responses to inquiries, (3) conditions indicating possible fraud,
and (4) circumstances suggesting the need for additional audit procedures beyond those ordinarily
required.

2-6 The auditors' responsibilities concerning the detection of noncompliance with laws by clients depends
on the relationship of the law or regulation to the financial statements. Certain laws and regulations,
such as income tax laws, have a direct effect on the amounts and disclosures included in the financial
statements. The auditors have a responsibility to design their audit to obtain reasonable assurance of
detecting material violations of these laws and regulations.
Many other laws and regulations, such as occupational safety and health laws, do not have a
direct effect on the amounts included in the financial statements. An audit carried out in accordance
with generally accepted auditing standards is not designed to detect client noncompliance with these
other laws.
Although an audit is not designed to provide reasonable assurance of detecting noncompliance
with other laws, the CPAs should be aware of the possibility that they have occurred and investigate
those identified. When they become aware of noncompliance with laws, the auditors should
communicate the situation to the audit committee of the board of directors to remedy the situation and
make appropriate modifications to the financial statements. If management fails to take appropriate
action, the auditors should consider withdrawing from the engagement.
2-7 The first sentence of the quotation is correct. The completion of an audit of financial statements by a
CPA following generally accepted auditing standards and satisfying the CPA provides the basis for
expression of an unmodified opinion on the fairness of financial statements.
The second sentence of the quotation is in error. Auditors never express an opinion (either
qualified or unmodified) on the fairness of financial statements without first performing an audit. The
audit provides the basis for the expression of an opinion. Such factors as audits made in prior years,
confidence in management, and a "quick review" of the current year's financial statements are not an
acceptable substitute for appropriate audit procedures.
2-8 The management of Pike Company is primarily responsible for the fairness of the company's financial
statements. The retention of certified public accountants to perform an audit and express an opinion
on the statements does not relieve management of its obligation to give an honest and complete
accounting of its conduct of corporate affairs.
2-9
Independent Auditor’s Report
To the Audit Committee of ABC Company
We have audited the accompanying consolidated balance sheets of ABC Company and its subsidiaries,
as of December 31, 20X1 and 20X0, and the related consolidated statements of income, retained
earnings, and cash flows for the years then ended.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in the United

States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of ABC Company and its subsidiaries as of December 31, 20X1 and
20X0, and the results of their operations and their cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
Phoenix, Arizona
February 5, 20X2
Williams & Co. LLP
2-10 Among the more common situations which prevent the issuance of an unmodified opinion upon
completion of an audit are the following:
(1) Certain necessary auditing procedures were omitted at the request of the client, or for reasons
beyond the control of the client or the auditors.
(2) The statements contained misstatements (or omissions) and the client refuses to change them.
2-11 In the opinion paragraph of the auditor's standard report the auditors make representations as to the
following:
(1) The fairness of the financial statements, in all material respects.
(2) Application of generally accepted accounting principles.
(3) By implication consistent application of generally accepted accounting principles.
(4) By implication adequate disclosure.
2-12 The issuance of a standard audit report tells us that the audit was performed in accordance with
generally accepted auditing standards and, accordingly, it was planned and performed to obtain
reasonable assurance about whether the financial statements are free of material misstatement due to
error or fraud. The audit included performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. These procedures were determined based on the auditors’
judgment, including their assessment of the risks of material misstatements of the financial statements.
The auditors also evaluated the appropriateness of accounting policies used by the client, the
reasonableness of significant accounting estimates, and the overall presentation of the financial
statements.

2-13 The auditors' report expresses an opinion on the client's financial statements, not on the accounting
records. A major purpose of the audit is to give outsiders assurance that the financial statements are
reliable. The client's accounting records are important to the public accounting firm only because they
constitute evidence supporting the financial statements. The CPAs also gather evidence from outside
the company and from internal sources other than the accounting records.
2-14 The public accounting firm must observe generally accepted auditing standards (or, if applicable,
PCAOB Standards) in order to merit confidence in its opinion. The result of following these
procedures is an audit report that includes a reasonable, but not absolute, assurance that the financial
statements do not contain material misstatements due to errors or fraud. Reasonable assurance implies
that there is a low level of risk remaining that the auditor expresses an opinion that the financial
statements are properly stated when they are not. Reasonable and not absolute assurance is necessary
due to (1) the nature of financial reporting (e.g., the necessary use of judgment), (2) the nature of audit
procedures (e.g., they often do not provide absolutely conclusive evidence) and (3) the need to conduct
an audit within a reasonable period of time at a reasonable cost. Accordingly, the auditor expresses an
opinion on the financial statements, not a statement of fact.
2-15 Regardless of how careful and professional an audit of financial statements the public accounting firm
has made, it cannot guarantee their correctness. The statements themselves include a variety of
estimates; for example, the estimate of the allowance for uncollectible accounts and the choice of
depreciation rates. Also, the auditors rely on a program of tests rather than on verifying every
transaction. Some errors, therefore, may go undetected. The audit gives the auditors a firm basis for
expressing an informed opinion on the financial statements, but no more than that.
2-16 A material amount is an amount that is sufficiently important to influence decisions made by
reasonable users of financial statements. The amount may differ by account based on specific account
characteristics. For example, a $100,000 shortage of cash may be extremely material to a small
company, and a shortage of that amount might lead to bankruptcy. But, a $100,000 valuation
overstatement of equipment may be of less significance if the company continues to produce its
products and operate as in the past. Materiality is discussed further in Chapter 6.
2-17 If the guidance for a transaction or event is not specified within the authoritative GAAP (the FASB
Codification), the auditor should first consider whether accounting principles for similar transactions or
events exist within GAAP; if that is the case, those principles are followed to the extent considered
appropriate. If not, nonauthoritative accounting guidance is consulted. Sources of nonauthoritative
accounting guidance and literature include
Practices that are widely recognized and prevalent either generally or in the industry.
FASB Concepts Statements.
AICPA Issues Papers
International Financial Reporting Standards.
Pronouncements of professional associations or regulatory agencies.
Technical Information Service Inquiries and Replies included in AICPA
Technical Practice Aids.
Accounting textbooks, handbooks, and articles.
The appropriateness of the above nonauthoritative accounting guidance and literature depends on its
relevance to particular circumstances, how specific it is, the general recognition of the issuer or author as
a authority, and the extent of its use in practice.

2-18 No. The attestation standards are meant to provide a general framework for the overall attestation
function and do not supersede the generally accepted auditing standard which were developed for
audits of annual historical financial statements. As a practical matter, the attestation standards are
most directly relevant to attest engagements that are not covered by specific authoritative standards,
such as attesting to attributes of computer software.
2-19 Quality control in a public accounting firm means policies and procedures which help assure that each
audit meets at least a minimum standard of quality. Such control is vital because even one substandard
audit could cause the firm to be defendant in a lawsuit that could threaten its continued existence.
Peer reviews refer to a study and appraisal by an independent evaluator (“peer reviewer”) of a
CPA firm’s work. In a system review, the evaluator considers the CPA firm’s system of quality control
to perform accounting and auditing work. In an engagement review, the evaluator studies and
evaluates a sample of a CPA firm’s actual accounting work, including accounting reports issued and
documentation prepared by the CPA firm as well as other procedures that the firm performed.
Engagement reviews are only available for CPA firms that do not perform audits or other similar
engagements.
Inspections are similar to peer reviews but are performed by the staff of the Public Company
Accounting Oversight Board. However, in performing PCAOB inspections the staff focuses only on
selected quality control issues and may consider aspects of practice management, such as the
determination of partner compensation. In selecting audits and reviews for inspection, the PCAOB
staff uses a risk assessment approach, which focuses on audits that have a high risk of lack of
compliance.
2-20 (a) Engagement performance. The objective of quality control procedures in this area is to
provide assurance that work performed is in accordance with professional standards and
regulatory and legal requirements, with policies and procedures addressing: (1) engagement
performance, (2) supervisions responsibilities and (3) review responsibilities.
(b) Human resources. The objective of quality control procedures in this area is to provide
assurance that the firm has personnel with the capabilities, competence and commitment to
ethical principles to: (1) perform its engagements in accordance with professional standards
and regulatory and legal requirements and (2) enable the firm to issue reports that are
appropriate in the circumstances.
(c) Monitoring. The objective of quality control procedures in this area is to determine that the
policies and procedures established for each of the elements are suitably designed and
effectively applied.
2-21 The AICPA’s Statement on Quality Control Standards identify six “elements” (areas) in which the
Institute feels that quality control procedures are appropriate, but it does not require any specific
quality control procedures. The Statement recognizes that specific procedures will vary among firms,
depending upon the size of the firm, the number of offices, and the nature of the firm’s practice.
2-22 The duties of the Public Company Accounting Oversight Board include:
Register public accounting firms that prepare audit reports for financial statement issuers.
Establish or adopt auditing, quality control, ethics, independence and other standards relating to
audit reports for issuers.
Conduct inspections of registered public accounting firms.

Perform other duties or functions to promote high professional standards for audits, enforce
compliance with the enabling act establishing the Board (i.e., the Sarbanes-Oxley Act of 2002
discussed in Chapter 1), set the budget, and manage operations.
2-23 A system review involves peer reviewers’ study and appraisal of a CPA firm’s system of quality
control to perform accounting and auditing work. A systems review includes determining whether the
CPA firm’s system of quality control for its accounting and auditing practice (non-public clients) is
designed and complied with to provide the CPA firm with reasonable assurance of performing and
reporting in conformity with applicable standards, including the quality control standards. An
engagement review is a type of peer review in which the peer reviewer selects a sample of a CPA
firm’s actual accounting work, including accounting reports issued and documentation prepared by the
CPA firm. This form of peer review is only available for CPA firms that do not perform audits, but do
perform accounting work, including reviews and compilations. The objective of an engagement
review is to evaluate whether the CPA firm’s reports are issued and procedures performed
appropriately in accordance with applicable professional standards.
2-24 The international audit report differs from one based on PCAOB reporting standards in the following
ways:
(1) The international report has an expanded description of management’s responsibility for the
financial statements and internal controls.
(2) The report also includes an expanded explanation of the audit process, which includes a
description of the auditors’ responsibility for internal control.
(3) The international report allows the accountants the following reporting options:
(a) Instead of indicating that the financial statements "present fairly, in all material respects,"
the accountants may substitute the phrase "give a true and fair view."
(b) The report may indicate that the financial statements comply with the country's relevant
statutes or laws.
(c) The report may be signed using the personal name of the auditor, the firm, or both.
(4) The city in which the auditors maintain an office is required to be included in the international
report.
Questions Requiring Analysis
2-25 The AICPA currently develops independence and ethical standards, quality control standards, and
auditing and attestation standards that apply to its members. However, AICPA standards are
applicable to the audits and auditors of nonpublic clients based on general acceptance by the courts,
and adoption by state boards of accountancy and other regulatory bodies. The AICPA also has a
voluntary peer review program, and enforces its standards on its members.
The PCAOB was given the legal authority to develop independence and ethical standards, quality
control standards, and auditing and attestation standards that apply to public company auditors and
integrated audits. The PCAOB also is charged with performing inspections of registered audit firms,
and may sanction the firms for noncompliance with its standards and the provisions of Sarbanes-Oxley
Act.

The state boards of accountancy regulate CPA firms and CPAs in the various states and jurisdictions.
They have the authority to establish their own standards, but have generally adopted the standards of
other bodies such as the AICPA and the PCAOB. A state board enforces its standards in its state or
jurisdiction and has the authority to revoke a CPA firm or individual CPA’s right to practice in the
state.
2-26 A firm of certified public accountants might find it difficult to maintain an attitude of independence
during the audit of financial statements if the public accounting firm or a partner in the firm:
(1) Derived a major portion of the firm's income from one client;
(2) Had a personal financial interest in the company being audited;
(3) Made the fee contingent upon the obtaining of a bank loan by the client;
(4) Was financially indebted to the client;
(5) Was a member of the board of directors of the client company or otherwise participated in the
management of the company.
2-27 If the certified public accountant is appointed controller of the corporation, he or she loses the
independent status which is the most essential qualification of the certified public accountant. The
interests of the officers of a corporation may at times be in conflict with the interests of creditors,
bankers, or stockholders. These outside groups are best protected when independent CPAs examine
the financial statements prepared by management of the corporation. The performance of an internal
audit function under the direction of the new controller may be a highly desirable step, but it does not
eliminate the need for an independent audit.
2-28 (a) To satisfy an auditor's responsibilities to detect Smith's errors and fraud, Reed should:
Assess the risk that Smith's errors and fraud may cause its financial statements to contain a
material misstatement.
Design the audit to provide reasonable assurance of detecting errors and fraud that are
material to the financial statements. In designing the audit, the auditors should respond to
risks by altering their overall approach to the audit or modifying the nature timing and
extent of audit procedures. They should also perform procedures to address the risk of
management override of internal control.
Exercise due care in planning, performing, and evaluating the results of audit procedures,
and exercise the proper degree of professional skepticism to achieve reasonable assurance
that material errors or fraud will be detected.
(b) Reed's responsibilities to detect Smith's noncompliance with laws that have a material and
direct effect on Smith's financial statements are the same as that for errors and fraud.
Reed's responsibilities to detect noncompliance with laws that have an indirect effect on
the financial statements are to be aware of the possibility that such noncompliance may have
occurred. If specific information comes to Reed's attention that provides evidence concerning
the possible existence of such noncompliance, Reed should apply audit procedures specifically
directed to ascertaining whether noncompliance has occurred.
(c) Reed's responsibilities when noncompliance with laws has been identified is to discuss the
situation with top management and to notify the audit committee of the board of directors so
that proper action can be taken, including making any necessary disclosures or adjustments to
the financial statements. If the client fails to take appropriate corrective action, Reed should
withdraw from the engagement. In addition, legal counsel or other appropriate specialist will
generally be contacted by the CPA.

2-29 (a) The two forms of peer review are a system review and an engagement review.
(b) The PCAOB inspections focus on the public-company audit practice of the firm. The
inspections are designed to determine the firm’s compliance with the Sarbanes-Oxley Act,
PCAOB and SEC requirements, and other professional standards.
(c) An inspection involves at least the following three components:
1. An inspection and review of selected public-company audit and review engagements.
2. An evaluation of the sufficiency of the quality control system of the firm, and the
manner of the documentation and communication of the system.
3. Performance of such other testing of the audit, supervisory, and quality control
procedures as are considered necessary.
PCAOB inspections differ from peer reviews in that the staff focuses only on selected quality
control issues and may consider aspects of practice management, such as the determination of
partner compensation. In selecting audits and reviews for inspection, the PCAOB staff uses a
risk assessment approach, which focuses on audits that have a high risk of lack of compliance.
(d) The PCAOB staff selects audit engagements for inspection on a risk basis. They select audits
with a higher risk of lack of noncompliance with professional standards. In addition, for the
selected audits, the staff focuses on the higher-risks aspects of the engagement.
Objective Questions
2-30 Multiple Choice Questions
(a) (4) Because the license to practice as a CPA is granted by the state, the applicable state,
through its state board of accountancy, has the right to revoke the right of an
individual to practice as a CPA. Students are sometimes confused by the fact that
while the CPA examination is administered nationally, it is the individual states that
award CPA certificates.
(b) (2) The AICPA has authority to establish auditing standard for nonpublic companies. The
Financial Accounting Standards board has authority for accounting standards of both
public and nonpublic companies. The Public Company Accounting Oversight Board
has authority to establish standards for audits and reviews of public companies, and
quality controls for firms that audit public companies.
(c) (2) FASB Concepts Statements are considered nonauthoritative guidance. The other
replies all represent authoritative guidance.
(d) (2) Financial statement audits provide reasonable, not absolute assurance.
(e) (2) The quality control standards were established to provide reasonable assurance that
professional services confirm with professional standards. Answer (1) is incomplete
since many standards in addition to reporting standards must be followed. Answer (3)
is incorrect because a peer review monitors whether a firm's quality control standards
are being met. Answer (4) is incorrect because continuing professional education is
only one part of a system of quality control.

(f) (3) The internal control of the client is not explicitly mentioned in the unqualified
standard report although it is implicit in the reference to generally accepted auditing
standards. Answers (1), (2), and (4) are all explicitly set forth in the unqualified
standard form of audit report.
(g) (1) An independent mental attitude on the part of the auditor is required by the second
general standard of the PCAOB. Answers (3) and (4) relate to the standards of field
work. Answer (2) confuses generally accepted accounting principles with generally
accepted auditing standards.
(h) (3) Such a quality control policy is designed to assure that personnel assigned to an
engagement are independent to perform the work, an ethical requirement.
(i) (1) An audit provides reasonable assurance of detecting misstatements due to fraud,
regardless of whether due to fraudulent financial reporting or misappropriation of
assets.
(j) (1) An integrated audit report on the financial statements of a public company states that
the audit was performed in accordance with Public Company Accounting Oversight
Board standards, not AICPA standards.
(k) (3) The PCAOB staff performs inspections of audit firms that are registered with the
PCAOB. In order to perform an audit of a public client an audit firm must be
registered.
(l) (4) Neither the AICPA audit report nor the international audit report include an opinion
on internal control. The other replies provide actual differences between the two
reports.
2-31 Adapted AICPA Task-Based Simulation
Reviewer’s Comments Comment
is correct
(yes or no)
Explanation of incorrect
comments (not required)
a. The report should not be addressed to
management.
Yes The report is ordinarily addressed to
the audit committee, the board of
directors, the shareholders or the
company itself.
b. The report should indicate that we have
“audited,” rather than “examined” the
financial statements (first paragraph after
introduction).
Yes
c. The report should not indicate anything
concerning management’s responsibility for
internal control.
No The report is correct as presented.
d. The report should state that the auditor’s
responsibility is to express “reasonable
assurance,” not an opinion (first paragraph
under “auditor’s responsibility).
No While an audit does provide
reasonable assurance, the report is
correct as presented.
e. The audit is designed to assess risks of
material misstatements due to errors or
fraud; the term “illegal acts” is incorrect
(second paragraph under auditor’s
Yes The word “errors” should replace
“illegal acts” in the report (and the
order of the terms should be
reversed).

responsibility).
f. The report should not refer to an auditor as
“evaluating the appropriateness of
accounting policies,” since those are the
responsibility of management.
No An audit report does refer to the
appropriateness of accounting
policies
g. The evidence should be sufficient and
appropriate rather than “adequate” (third
paragraph under auditor’s responsibility).
Yes Self explanatory.
h. The opinion should not include “in all
material respects” since the auditor is
providing an opinion on the accuracy of the
financial statements (opinion paragraph).
No Audits are performed to provide
reasonable assurance of detecting
material misstatements, and the
report so indicates.
i. The opinion should be on “accounting
principles generally accepted in the United
States of America,” not on auditing
standards (opinion paragraph).”
Yes The financial statements follow the
appropriate accounting principles,
while the audit follows generally
accepted auditing standards.
j. The signature on the report should be that of
the CPA firm, not that of the partner.
Yes While the international report allows
the partner to sign the report (in
addition to the CPA firm name), the
GAAS report does not.
2-32
Statement Agree (A) or
Disagree (D)
Comment
a. The report must begin with “CPA’s Report”
at the top.
D The top must have a title that
includes the term
“independent.”
b. The report is ordinarily addressed “to whom
it may concern.”
D It is ordinarily addressed to the
audit committee, the board of
directors, or the company
itself.
c. The report indicates that management is
responsible for the preparation of the
financial statements.
A
d. The report indicates that the auditor’s
responsibility is to obtain particular assurance
about whether the financial statements are
free of material misstatements.
D Reasonable assurance is
obtained.
e. The report ordinarily concludes on whether
the financial statements are in conformity
with generally accepted auditing standards.
D It concludes on whether the
financial statements are in
conformity with generally
accepted accounting
principles.
f. The report indicates that the audit procedures
selected depend on the auditor’s judgment.
A
g. The report indicates that the audit evidence
obtained is sufficient and appropriate to
provide a basis for the audit opinion.
A
h. The report indicates that the auditor
considers and provides an opinion on internal
control.
D Internal control is considered,
but no opinion is provide on it.
2-33

a. 3 Agreed-upon procedures report.
b. 7 Audit report.
c. 6 An unintentional misstatement.
d. 8 Generally accepted accounting principles.
e. 12 Misappropriation of assets.
f. 4 A review of a CPA firm conducted by PCAOB.
g. 10 Human resources and monitoring.
h. 2 A CPA firm that may conduct audits of public or nonpublic companies.
Statement Type of
Audit
Report
a. The auditors are unable to determine the overall fairness of the financial
statements.
D
b. This is the report most clients prefer. S
c. A limitation on the scope of the audit is significant, but not so as to
overshadow an overall opinion.
Q
d. The financial statements are not fairly presented. A
e. A material departure from GAAP exists, but not so material as to overshadow
an overall opinion.
Q
2-34
Principles Yes (Y) Comment
or
No (N)
a. The purpose of an audit is to provide financial statement users with an N Not
opinion by the auditor on whether the financial statements are
presented fairly, in all material and immaterial respects, in accordance
with the applicable financial reporting framework.
“immaterial”
b. The auditors are responsible for having appropriate competence and
capabilities to perform the audit.
Y
c. The auditor is unable to obtain absolute assurance that the financial
statements are free from material misstatement.
Y
d. The opinion states whether the financial statements are presented
fairly, in all material respects, in accordance with the applicable
financial reporting framework.
Y
e. Inherent limitations of an audit include the need to conduct an audit to N The balance
achieve a balance between the benefit to management and the benefit is a proper
to the auditors. balance
between
benefit and
cost.
2-35 Definitions

Problems
2-36 SOLUTION: White Company (Estimated time: 20 minutes)
(a) No, Rezzo would not be justified in complying with White's request. Although Rezzo is a
CPA, he has not audited the financial statements of White Company in accordance with
generally accepted auditing standards. Preparation of financial statements cannot be construed
as synonymous with auditing the statements. Furthermore, because of Rezzo's deep
involvement with White Company, it is questionable whether he could maintain an
independence of mental attitude if he did audit the financial statements.
(b) If Rezzo were justified in issuing a standard audit report on the financial statements of White
Company, he should not do so until he has completed an audit of the financial statements. The
auditor does not express an opinion on financial statements without first performing an audit.
(c) No, it would not be reasonable for the public accounting firm employing Rezzo to assign him
to the audit of the White Company financial statements. Having himself prepared the financial
statements; Rezzo would be in the position of attempting to independently evaluate the
products of his own work. Independence of mental attitude in the appraisal of one's own work
is extremely doubtful.
2-37 SOLUTION: Gray Manufacturing Corporation (Estimated time: 25 minutes)
The following memorandum summarizes the response of Bart James, CPA, to the request of a client
for extension of the attest function to the problem of pollution control.
Dear John:
As much as I support your strenuous efforts to minimize air and water pollution from the
manufacturing operations of your company, there are specific reasons which make it impossible for
me as a CPA to attest to the extent of your accomplishments in this area along the lines you have
suggested. When we perform the attest function with respect to your financial statements each year,
we are expressing our professional opinion that your financial statements are prepared in conformity
with certain standards, which we call "generally accepted accounting principles." In order for us to
attest to the effectiveness of your pollution control program, recognized standards would have to be
established in this field. No such standards presently exist for a factory to the best of my knowledge.
Of course the federal government has set standards for exhaust emissions on automobile engines and
we could, by retaining independent consulting engineers, obtain a basis for attesting to the
compliance of a given automobile engine to those standards.
We are quite willing to extend the attest function in various directions if we can find a basis
for objective comparison of a given operation with a clearly defined standard. Perhaps your
engineering department can develop some specific quantitative data on the industrial waste from your
operations. We might then be able to perform the necessary examination of such data to enable us to
attest to the validity of your representations as to your operations. Of course, this would not be the
same thing as providing your relative position in the industry. After reviewing this possibility with
your engineering staff, if you would like to discuss the matter further with us, we will be glad to meet
with you.
Sincerely,
Bart James
In-Class Team Case

2-38 SOLUTION: Hide It (Estimated time: 25 minutes)
(a) No, this is not an error since errors are unintentional.
(b) This situation does appear to involve misstatements due to misappropriation of assets. It is a
misstatement due to fraudulent financial reporting because of the omission of the information
from the financial statements. If the $100,000 withdrawals have been abstracted for personal
use, the situation also involves a misstatement arising from misappropriation of assets.
(c) Certain laws have a direct effect on the financial statement amounts and are considered on
every audit. An example is income tax law that affects the amount of income tax expense in
the financial statements of most clients. This situation involves what appears to be non-
compliance with a law that has a "direct effect" since, at a minimum; taxes have not been paid
on the income involved.
(d) The auditors will need to consider whether withdrawal is necessary, perhaps after consultation
with their attorney. The case suggests that the unrecorded deposits occurred prior to current
management involvement with the company. Note, however, that interest was earned during
the period this management has been with the company, and withdrawals have been made
during this same period. The auditors would wish to consider when current management
became aware of the account and the nature of the withdrawals when considering whether to
resign from the engagement.
Research and Discussion Case
2-39 SOLUTION: Enormo Corporation (Estimated time: 45 minutes)
(a) When the auditors discover illegal acts by a public client, they should consider three major
factors. First, the auditors should consider the effect of the acts on the client's financial
statements, including the possibility of fines and loss of business. To comply with generally
accepted accounting principles, the financial statements must reflect the material effects of
illegal acts.
Second, the illegal acts may affect the auditors' assessment of the integrity of
management. In deciding whether to continue to serve the client, the auditors should consider
the nature of the illegal acts and management's response to the acts after they are uncovered.
Third, the auditors should consider whether the occurrence of the illegal act indicates
that there is a material weakness in the company’s internal control over financial reporting.
(b) The following courses of action are available to the auditors:
(1) The auditors could issue an unqualified opinion and take no further steps regarding
the illegal activities. This course of action could be argued on the basis that the effect
of the acts on the financial statements is not material. If the auditors take this course
of action, they should also consider whether the illegal act and related actions by
management and the board indicate a material weakness exists that would affect their
report on internal control over financial reporting.
(2) The auditors could issue a qualified opinion because the financial statements depart
from generally accepted accounting principles, in that they fail to disclose the illegal
acts. This course of action could be argued on the basis that any illegal activities by
the client are material, especially when management fails to take any steps to prevent

the acts. If the auditors take this course of action, they should also consider whether
the illegal act and related actions by management and the board indicate a material
weakness exists that would affect their report on internal control over financial
reporting.
(3) The auditors could withdraw from the engagement, because the client's failure to take
actions to prevent such activities indicates that Enormo's management lacks sufficient
integrity.
(c) We believe that the auditors should consider withdrawing from the engagement. Enormo's top
management seems far too complacent regarding these activities. Their refusal to take any
action to prevent the acts in the future provides a signal to lower level management that top
management approves of illegal acts. The auditors clearly should question the integrity of
management in this situation.

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whole must be forever preserved, and second: that slavery must be
abolished. If they were willing to concede these two points, then he
was ready to enter into negotiations and was almost willing to hand
them a blank sheet of paper with his signature attached for them to
fill in the terms upon which they were willing to live with us in the
Union and be one people. He always showed a generous and kindly
spirit toward the Southern people, and I never heard him abuse an
enemy. Some of the cruel things said about President Lincoln,
particularly in the North, used to pierce him to the heart; but never
in my presence did he evince a revengeful disposition and I saw a
great deal of him at City Point, for he seemed glad to get away from
the cares and anxieties of the capital.
Right here I might relate an anecdote of Mr. Lincoln. It was on the
occasion of his visit to me just after he had talked with the peace
commissioners at Hampton Roads. After a little conversation, he
asked me if I had seen that overcoat of Stephens's. I replied that I
had. "Well," said he, "did you see him take it off?" I said yes. "Well,"
said he, "didn't you think it was the biggest shuck and the littlest ear
that ever you did see?" Long afterwards I told this story to the
Confederate General J. B. Gordon, at the time a member of the
Senate. He repeated it to Stephens, and, as I heard afterwards,
Stephens laughed immoderately at the simile of Mr. Lincoln.
The rest of the winter, after the departure of the peace
commissioners, passed off quietly and uneventfully, except for two
or three little incidents. On one occasion during this period, while I
was visiting Washington City for the purpose of conferring with the
administration, the enemy's cavalry under General Wade Hampton,
passing our extreme left and then going to the south, got in east of
us. Before their presence was known, they had driven off a large
number of beef cattle that were grazing in that section. It was a fair
capture, and they were sufficiently needed by the Confederates. It
was only retaliating for what we had done, sometimes for many
weeks at a time, when out of supplies taking what the Confederate
army otherwise would have gotten. As appears in this book, on one
single occasion we captured five thousand head of cattle which were

crossing the Mississippi River near Port Hudson on their way from
Texas to supply the Confederate army in the East.
One of the most anxious periods of my experience during the
rebellion was the last few weeks before Petersburg. I felt that the
situation of the Confederate army was such that they would try to
make an escape at the earliest practicable moment, and I was
afraid, every morning, that I would awake from my sleep to hear
that Lee had gone, and that nothing was left but a picket line. He
had his railroad by the way of Danville south, and I was afraid that
he was running off his men and all stores and ordnance except such
as it would be necessary to carry with him for his immediate
defence. I knew he could move much more lightly and more rapidly
than I, and that, if he got the start, he would leave me behind so
that we would have the same army to fight again farther south and
the war might be prolonged another year.
I was led to this fear by the fact that I could not see how it was
possible for the Confederates to hold out much longer where they
were. There is no doubt that Richmond would have been evacuated
much sooner than it was, if it had not been that it was the capital of
the so-called Confederacy, and the fact of evacuating the capital
would, of course, have had a very demoralizing effect upon the
Confederate army. When it was evacuated (as we shall see further
on), the Confederacy at once began to crumble and fade away.
Then, too, desertions were taking place, not only among those who
were with General Lee in the neighborhood of their capital, but
throughout the whole Confederacy. I remember that in a
conversation with me on one occasion long prior to this, General
Butler remarked that the Confederates would find great difficulty in
getting more men for their army; possibly adding, though I am not
certain as to this, "unless they should arm the slave."
The South, as we all knew, were conscripting every able-bodied
man between the ages of eighteen and forty-five; and now they had
passed a law for the further conscription of boys from fourteen to
eighteen, calling them the junior reserves, and men from forty-five
to sixty to be called the senior reserves. The latter were to hold the

necessary points not in immediate danger, and especially those in
the rear. General Butler, in alluding to this conscription, remarked
that they were thus "robbing both the cradle and the grave," an
expression which I afterwards used in writing a letter to Mr.
Washburn.
It was my belief that while the enemy could get no more recruits
they were losing at least a regiment a day, taking it throughout the
entire army, by desertions alone. Then by casualties of war, sickness,
and other natural causes, their losses were much heavier. It was a
mere question of arithmetic to calculate how long they could hold
out while that rate of depletion was going on. Of course long before
their army would be thus reduced to nothing the army which we had
in the field would have been able to capture theirs. Then too I knew
from the great number of desertions, that the men who had fought
so bravely, so gallantly and so long for the cause which they believed
in—and as earnestly, I take it, as our men believed in the cause for
which they were fighting—had lost hope and become despondent.
Many of them were making application to be sent North where they
might get employment until the war was over, when they could
return to their Southern homes.
For these and other reasons I was naturally very impatient for the
time to come when I could commence the spring campaign, which I
thoroughly believed would close the war.
There were two considerations I had to observe, however, and
which detained me. One was the fact that the winter had been one
of heavy rains, and the roads were impassable for artillery and
teams. It was necessary to wait until they had dried sufficiently to
enable us to move the wagon trains and artillery necessary to the
efficiency of an army operating in the enemy's country. The other
consideration was that General Sheridan with the cavalry of the
Army of the Potomac was operating on the north side of the James
River, having come down from the Shenandoah. It was necessary
that I should have his cavalry with me, and I was therefore obliged
to wait until he could join me south of the James River.
Let us now take account of what he was doing.

On the 5th of March I had heard from Sheridan. He had met Early
between Staunton and Charlottesville and defeated him, capturing
nearly his entire command. Early and some of his officers escaped
by finding refuge in the neighboring houses or in the woods.
On the 12th I heard from him again. He had turned east, to come
to White House. He could not go to Lynchburg as ordered, because
the rains had been so very heavy and the streams were so very
much swollen. He had a pontoon train with him, but it would not
reach half way across some of the streams, at their then stage of
water, which he would have to get over in going south as first
ordered.
I had supplies sent around to White House for him, and kept the
depot there open until he arrived. We had intended to abandon it
because the James River had now become our base of supplies.
Sheridan had about ten thousand cavalry with him, divided into
two divisions commanded respectively by Custer and Devin. General
Merritt was acting as chief of cavalry. Sheridan moved very light,
carrying only four days' provisions with him, with a larger supply of
coffee, salt and other small rations, and a very little else besides
ammunition. They stopped at Charlottesville and commenced tearing
up the railroad back toward Lynchburg. He also sent a division along
the James River Canal to destroy locks, culverts etc. All mills and
factories along the lines of march of his troops were destroyed also.
Sheridan had in this way consumed so much time that his making
a march to White House was now somewhat hazardous. He
determined therefore to fight his way along the railroad and canal till
he was as near to Richmond as it was possible to get, or until
attacked. He did this, destroying the canal as far as Goochland, and
the railroad to a point as near Richmond as he could get. On the
10th he was at Columbia. Negroes had joined his column to the
number of two thousand or more, and they assisted considerably in
the work of destroying the railroads and the canal. His cavalry was in
as fine a condition as when he started, because he had been able to
find plenty of forage. He had captured most of Early's horses and
picked up a good many others on the road. When he reached

Ashland he was assailed by the enemy in force. He resisted their
assault with part of his command, moved quickly across the South
and North Anna, going north, and reached White House safely on
the 19th.
The time for Sherman to move had to be fixed with reference to
the time he could get away from Goldsboro where he then was.
Supplies had to be got up to him which would last him through a
long march, as there would probably not be much to be obtained in
the country through which he would pass. I had to arrange,
therefore, that he should start from where he was, in the
neighborhood of Goldsboro on the 18th of April, the earliest day at
which he supposed he could be ready.
Sherman was anxious that I should wait where I was until he
could come up, and make a sure thing of it; but I had determined to
move as soon as the roads and weather would admit of my doing
so. I had been tied down somewhat in the matter of fixing any time
at my pleasure for starting, until Sheridan, who was on his way from
the Shenandoah Valley to join me, should arrive, as both his
presence and that of his cavalry were necessary to the execution of
the plans which I had in mind. However, having arrived at White
House on the 19th of March, I was enabled to make my plans.
Prompted by my anxiety lest Lee should get away some night
before I was aware of it, and having the lead of me, push into North
Carolina to join with Johnston in attempting to crush out Sherman, I
had, as early as the 1st of the month of March, given instructions to
the troops around Petersburg to keep a sharp lookout to see that
such a movement should not escape their notice, and to be ready
strike at once if it was undertaken.
It is now known that early in the month of March Mr. Davis and
General Lee had a consultation about the situation of affairs in and
about and Petersburg, and they both agreed places were no longer
tenable for them, and that they must get away as soon as possible.
They, too, were waiting for dry roads, or a condition of the roads
which would make it possible to move.

General Lee, in aid of his plan of escape, and to secure a wider
opening to enable them to reach the Danville Road with greater
security than he would have in the way the two armies were
situated, determined upon an assault upon the right of our lines
around Petersburg. The night of the 24th of March was fixed upon
for this assault, and General Gordon was assigned to the execution
of the plan. The point between Fort Stedman and Battery No. 10,
where our lines were closest together, was selected as the point of
his attack. The attack was to be made at night, and the troops were
to get possession of the higher ground in the rear where they
supposed we had intrenchments, then sweep to the right and left,
create a panic in the lines of our army, and force me to contract my
lines. Lee hoped this would detain me a few days longer and give
him an opportunity of escape. The plan was well conceived and the
execution of it very well done indeed, up to the point of carrying a
portion of our line.
Gordon assembled his troops under the cover of night, at the
point at which they were to make their charge, and got possession
of our picket-line, entirely without the knowledge of the troops inside
of our main line of intrenchments; this reduced the distance he
would have to charge over to not much more than fifty yards. For
some time before the deserters had been coming in with great
frequency, often bringing their arms with them, and this the
Confederate general knew. Taking advantage of this knowledge he
sent his pickets, with their arms, creeping through to ours as if to
desert. When they got to our lines they at once took possession and
sent our pickets to the rear as prisoners. In the main line our men
were sleeping serenely, as if in great security. This plan was to have
been executed and much damage done before daylight; but the
troops that were to reinforce Gordon had to be brought from the
north side of the James River and, by some accident on the railroad
on their way over, they were detained for a considerable time; so
that it got to be nearly daylight before they were ready to make the
charge.

The charge, however, was successful and almost without loss, the
enemy passing through our lines between Fort Stedman and Battery
No. 10. Then turning to the right and left they captured the fort and
the battery, with all the arms and troops in them. Continuing the
charge, they also carried batteries Eleven and Twelve to our left,
which they turned toward City Point.
Meade happened to be at City Point that night, and this break in
his line cut him off from all communication with his headquarters.
Parke, however, commanding the 9th corps when this breach took
place, telegraphed the facts to Meade's headquarters, and learning
that the general was away, assumed command himself and with
commendable promptitude made all preparations to drive the enemy
back. General Tidball gathered a large number of pieces of artillery
and planted them in rear of the captured works so as to sweep the
narrow space of ground between the lines very thoroughly. Hartranft
was soon out with his division, as also was Willcox. Hartranft to the
right of the breach headed the rebels off in that direction and rapidly
drove them back into Fort Stedman. On the other side they were
driven back into the intrenchments which they had captured, and
batteries eleven and twelve were retaken by Willcox early in the
morning.
Parke then threw a line around outside of the captured fort and
batteries, and communication was once more established. The
artillery fire was kept up so continuously that it was impossible for
the Confederates to retreat, and equally impossible for
reinforcements to join them. They all, therefore, fell captives into our
hands. This effort of Lee's cost him about four thousand men, and
resulted in their killing, wounding and capturing about two thousand
of ours.
After the recapture of the batteries taken by the Confederates, our
troops made a charge and carried the enemy's intrenched picket
line, which they strengthened and held. This, in turn, gave us but a
short distance to charge over when our attack came to be made a
few days later.

The day that Gordon was making dispositions for this attack (24th
of March) I issued my orders for the movement to commence on the
29th. Ord, with three divisions of infantry and Mackenzie's cavalry,
was to move in advance on the night of the 27th, from the north
side of the James River and take his place on our extreme left, thirty
miles away. He left Weitzel with the rest of the Army of the James to
hold Bermuda Hundred and the north of the James River. The
engineer brigade was to be left at City Point, and Parke's corps in
the lines about Petersburg. [See orders to Major-General Meade,
Ord, and Sheridan, March 24th, Appendix.]
Ord was at his place promptly. Humphreys and Warren were then
on our extreme left with the 2d and 5th corps. They were directed
on the arrival of Ord, and on his getting into position in their places,
to cross Hatcher's Run and extend out west toward Five Forks, the
object being to get into a position from which we could strike the
South Side Railroad and ultimately the Danville Railroad. There was
considerable fighting in taking up these new positions for the 2d and
5th corps, in which the Army of the James had also to participate
somewhat, and the losses were quite severe.
This was what was known as the Battle of White Oak Road.

CHAPTER LXIV.
INTERVIEW WITH SHERIDAN—GRAND
MOVEMENT OF THE ARMY OF THE POTOMAC—
SHERIDAN'S ADVANCE ON FIVE FORKS—
BATTLE OF FIVE FORKS—PARKE AND WRIGHT
STORM THE ENEMY'S LINE—BATTLES BEFORE
PETERSBURG.
Sheridan reached City Point on the 26th day of March. His horses,
of course, were jaded and many of them had lost their shoes. A few
days of rest were necessary to recuperate the animals and also to
have them shod and put in condition for moving. Immediately on
General Sheridan's arrival at City Point I prepared his instructions for
the move which I had decided upon. The movement was to
commence on the 29th of the month.
After reading the instructions I had given him, Sheridan walked
out of my tent, and I followed to have some conversation with him
by himself—not in the presence of anybody else, even of a member
of my staff. In preparing his instructions I contemplated just what
took place; that is to say, capturing Five Forks, driving the enemy
from Petersburg and Richmond and terminating the contest before
separating from the enemy. But the Nation had already become
restless and discouraged at the prolongation of the war, and many
believed that it would never terminate except by compromise.
Knowing that unless my plan proved an entire success it would be
interpreted as a disastrous defeat, I provided in these instructions
that in a certain event he was to cut loose from the Army of the
Potomac and his base of supplies, and living upon the country

proceed south by the way of the Danville Railroad, or near it, across
the Roanoke, get in the rear of Johnston, who was guarding that
road, and cooperate with Sherman in destroying Johnston; then with
these combined forces to help carry out the instructions which
Sherman already had received, to act in cooperation with the armies
around Petersburg and Richmond.
I saw that after Sheridan had read his instructions he seemed
somewhat disappointed at the idea, possibly, of having to cut loose
again from the Army of the Potomac, and place himself between the
two main armies of the enemy. I said to him: "General, this portion
of your instructions I have put in merely as a blind;" and gave him
the reason for doing so, heretofore described. I told him that, as a
matter of fact, I intended to close the war right here, with this
movement, and that he should go no farther. His face at once
brightened up, and slapping his hand on his leg he said: "I am glad
to hear it, and we can do it."
Sheridan was not however to make his movement against Five
Forks until he got further instructions from me.
One day, after the movement I am about to describe had
commenced, and when his cavalry was on our extreme left and far
to the rear, south, Sheridan rode up to where my headquarters were
then established, at Dabney's Mills. He met some of my staff officers
outside, and was highly jubilant over the prospects of success, giving
reasons why he believed this would prove the final and successful
effort. Although my chief-of-staff had urged very strongly that we
return to our position about City Point and in the lines around
Petersburg, he asked Sheridan to come in to see me and say to me
what he had been saying to them. Sheridan felt a little modest about
giving his advice where it had not been asked; so one of my staff
came in and told me that Sheridan had what they considered
important news, and suggested that I send for him. I did so, and
was glad to see the spirit of confidence with which he was imbued.
Knowing as I did from experience, of what great value that feeling of
confidence by a commander was, I determined to make a movement
at once, although on account of the rains which had fallen after I

had started out the roads were still very heavy. Orders were given
accordingly.
Finally the 29th of March came, and fortunately there having been
a few days free from rain, the surface of the ground was dry, giving
indications that the time had come when we could move. On that
date I moved out with all the army available after leaving sufficient
force to hold the line about Petersburg. It soon set in raining again
however, and in a very short time the roads became practically
impassable for teams, and almost so for cavalry. Sometimes a horse
or mule would be standing apparently on firm ground, when all at
once one foot would sink, and as he commenced scrambling to catch
himself all his feet would sink and he would have to be drawn by
hand out of the quicksands so common in that part of Virginia and
other southern States. It became necessary therefore to build
corduroy roads every foot of the way as we advanced, to move our
artillery upon. The army had become so accustomed to this kind of
work, and were so well prepared for it, that it was done very rapidly.
The next day, March 30th, we had made sufficient progress to the
south-west to warrant me in starting Sheridan with his cavalry over
by Dinwiddie with instructions to then come up by the road leading
north-west to Five Forks, thus menacing the right of Lee's line.
This movement was made for the purpose of extending our lines
to the west as far as practicable towards the enemy's extreme right,
or Five Forks. The column moving detached from the army still in the
trenches was, excluding the cavalry, very small. The forces in the
trenches were themselves extending to the left flank. Warren was on
the extreme left when the extension began, but Humphreys was
marched around later and thrown into line between him and Five
Forks.

My hope was that Sheridan would be able to carry Five Forks, get
on the enemy's right flank and rear, and force them to weaken their
centre to protect their right so that an assault in the centre might be
successfully made. General Wright's corps had been designated to
make this assault, which I intended to order as soon as information
reached me of Sheridan's success. He was to move under cover as
close to the enemy as he could get.
It is natural to suppose that Lee would understand my design to
be to get up to the South Side and ultimately to the Danville
Railroad, as soon as he had heard of the movement commenced on
the 29th. These roads were so important to his very existence while
he remained in Richmond and Petersburg, and of such vital
importance to him even in case of retreat, that naturally he would
make most strenuous efforts to defend them. He did on the 30th
send Pickett with five brigades to reinforce Five Forks. He also sent
around to the right of his army some two or three other divisions,
besides directing that other troops be held in readiness on the north
side of the James River to come over on call. He came over himself
to superintend in person the defence of his right flank.
Sheridan moved back to Dinwiddie Court-House on the night of
the 30th, and then took a road leading north-west to Five Forks. He

had only his cavalry with him. Soon encountering the rebel cavalry
he met with a very stout resistance. He gradually drove them back
however until in the neighborhood of Five Forks. Here he had to
encounter other troops besides those he had been contending with,
and was forced to give way.
In this condition of affairs he notified me of what had taken place
and stated that he was falling back toward Dinwiddie gradually and
slowly, and asked me to send Wright's corps to his assistance. I
replied to him that it was impossible to send Wright's corps because
that corps was already in line close up to the enemy, where we
should want to assault when the proper time came, and was besides
a long distance from him; but the 2d (Humphreys's) and 5th
(Warren's) corps were on our extreme left and a little to the rear of
it in a position to threaten the left flank of the enemy at Five Forks,
and that I would send Warren.
Accordingly orders were sent to Warren to move at once that
night (the 31st) to Dinwiddie Court House and put himself in
communication with Sheridan as soon as possible, and report to him.
He was very slow in moving, some of his troops not starting until
after 5 o'clock next morning. When he did move it was done very
deliberately, and on arriving at Gravelly Run he found the stream
swollen from the recent rains so that he regarded it as not fordable.
Sheridan of course knew of his coming, and being impatient to get
the troops up as soon as possible, sent orders to him to hasten. He
was also hastened or at least ordered to move up rapidly by General
Meade. He now felt that he could not cross that creek without
bridges, and his orders were changed to move so as to strike the
pursuing enemy in flank or get in their rear; but he was so late in
getting up that Sheridan determined to move forward without him.
However, Ayres's division of Warren's corps reached him in time to
be in the fight all day, most of the time separated from the
remainder of the 5th corps and fighting directly under Sheridan.
Warren reported to Sheridan about 11 o'clock on the 1st, but the
whole of his troops were not up so as to be much engaged until late
in the afternoon. Griffin's division in backing to get out of the way of

a severe cross fire of the enemy was found marching away from the
fighting. This did not continue long, however; the division was
brought back and with Ayres's division did most excellent service
during the day. Crawford's division of the same corps had backed
still farther off, and although orders were sent repeatedly to bring it
up, it was late before it finally got to where it could be of material
assistance. Once there it did very excellent service.
Sheridan succeeded by the middle of the afternoon or a little later,
in advancing up to the point from which to make his designed
assault upon Five Forks itself. He was very impatient to make the
assault and have it all over before night, because the ground he
occupied would be untenable for him in bivouac during the night.
Unless the assault was made and was successful, he would be
obliged to return to Dinwiddie Court-House, or even further than
that for the night.
It was at this junction of affairs that Sheridan wanted to get
Crawford's division in hand, and he also wanted Warren. He sent
staff officer after staff officer in search of Warren, directing that
general to report to him, but they were unable to find him. At all
events Sheridan was unable to get that officer to him. Finally he
went himself. He issued an order relieving Warren and assigning
Griffin to the command of the 5th corps. The troops were then
brought up and the assault successfully made.
I was so much dissatisfied with Warren's dilatory movements in
the battle of White Oak Road and in his failure to reach Sheridan in
time, that I was very much afraid that at the last moment he would
fail Sheridan. He was a man of fine intelligence, great earnestness,
quick perception, and could make his dispositions as quickly as any
officer, under difficulties where he was forced to act. But I had
before discovered a defect which was beyond his control, that was
very prejudicial to his usefulness in emergencies like the one just
before us. He could see every danger at a glance before he had
encountered it. He would not only make preparations to meet the
danger which might occur, but he would inform his commanding
officer what others should do while he was executing his move.

I had sent a staff officer to General Sheridan to call his attention
to these defects, and to say that as much as I liked General Warren,
now was not a time when we could let our personal feelings for any
one stand in the way of success; and if his removal was necessary to
success, not to hesitate. It was upon that authorization that
Sheridan removed Warren. I was very sorry that it had been done,
and regretted still more that I had not long before taken occasion to
assign him to another field of duty.
It was dusk when our troops under Sheridan went over the
parapets of the enemy. The two armies were mingled together there
for a time in such manner that it was almost a question which one
was going to demand the surrender of the other. Soon, however, the
enemy broke and ran in every direction; some six thousand
prisoners, besides artillery and small-arms in large quantities, falling
into our hands. The flying troops were pursued in different
directions, the cavalry and 5th corps under Sheridan pursuing the
larger body which moved north-west.
This pursuit continued until about nine o'clock at night, when
Sheridan halted his troops, and knowing the importance to him of
the part of the enemy's line which had been captured, returned,
sending the 5th corps across Hatcher's Run to just south-west of
Petersburg, and facing them toward it. Merritt, with the cavalry,
stopped and bivouacked west of Five Forks.
This was the condition which affairs were in on the night of the
1st of April. I then issued orders for an assault by Wright and Parke
at four o'clock on the morning of the 2d. I also ordered the 2d corps,
General Humphreys, and General Ord with the Army of the James,
on the left, to hold themselves in readiness to take any advantage
that could be taken from weakening in their front.
I notified Mr. Lincoln at City Point of the success of the day; in fact
I had reported to him during the day and evening as I got news,
because he was so much interested in the movements taking place
that I wanted to relieve his mind as much as I could. I notified
Weitzel on the north side of the James River, directing him, also, to

keep close up to the enemy, and take advantage of the withdrawal
of troops from there to promptly enter the city of Richmond.
I was afraid that Lee would regard the possession of Five Forks as
of so much importance that he would make a last desperate effort to
retake it, risking everything upon the cast of a single die. It was for
this reason that I had ordered the assault to take place at once, as
soon as I had received the news of the capture of Five Forks. The
corps commanders, however, reported that it was so dark that the
men could not see to move, and it would be impossible to make the
assault then. But we kept up a continuous artillery fire upon the
enemy around the whole line including that north of the James River,
until it was light enough to move, which was about a quarter to five
in the morning.
At that hour Parke's and Wright's corps moved out as directed,
brushed the abatis from their front as they advanced under a heavy
fire of musketry and artillery, and went without flinching directly on
till they mounted the parapets and threw themselves inside of the
enemy's line. Parke, who was on the right, swept down to the right
and captured a very considerable length of line in that direction, but
at that point the outer was so near the inner line which closely
enveloped the city of Petersburg that he could make no advance
forward and, in fact, had a very serious task to turn the lines which
he had captured to the defence of his own troops and to hold them;
but he succeeded in this.
Wright swung around to his left and moved to Hatcher's Run,
sweeping everything before him. The enemy had traverses in rear of
his captured line, under cover of which he made something of a
stand, from one to another, as Wright moved on; but the latter met
no serious obstacle. As you proceed to the left the outer line
becomes gradually much farther from the inner one, and along
about Hatcher's Run they must be nearly two miles apart. Both
Parke and Wright captured a considerable amount of artillery and
some prisoners—Wright about three thousand of them.
In the meantime Ord and Humphreys, in obedience to the
instructions they had received, had succeeded by daylight, or very

early in the morning, in capturing the intrenched picket-lines in their
front; and before Wright got up to that point, Ord had also
succeeded in getting inside of the enemy's intrenchments. The
second corps soon followed; and the outer works of Petersburg were
in the hands of the National troops, never to be wrenched from
them again. When Wright reached Hatcher's Run, he sent a
regiment to destroy the South Side Railroad just outside of the city.
My headquarters were still at Dabney's saw-mills. As soon as I
received the news of Wright's success, I sent dispatches announcing
the fact to all points around the line, including the troops at
Bermuda Hundred and those on the north side of the James, and to
the President at City Point. Further dispatches kept coming in, and
as they did I sent the additional news to these points. Finding at
length that they were all in, I mounted my horse to join the troops
who were inside the works. When I arrived there I rode my horse
over the parapet just as Wright's three thousand prisoners were
coming out. I was soon joined inside by General Meade and his staff.
Lee made frantic efforts to recover at least part of the lost ground.
Parke on our right was repeatedly assaulted, but repulsed every
effort. Before noon Longstreet was ordered up from the north side of
the James River thus bringing the bulk of Lee's army around to the
support of his extreme right. As soon as I learned this I notified
Weitzel and directed him to keep up close to the enemy and to have
Hartsuff, commanding the Bermuda Hundred front, to do the same
thing, and if they found any break to go in; Hartsuff especially
should do so, for this would separate Richmond and Petersburg.
Sheridan, after he had returned to Five Forks, swept down to
Petersburg, coming in on our left. This gave us a continuous line
from the Appomattox River below the city to the same river above.
At eleven o'clock, not having heard from Sheridan, I reinforced Parke
with two brigades from City Point. With this additional force he
completed his captured works for better defence, and built back
from his right, so as to protect his flank. He also carried in and made
an abatis between himself and the enemy. Lee brought additional

troops and artillery against Parke even after this was done, and
made several assaults with very heavy losses.
The enemy had in addition to their intrenched line close up to
Petersburg, two enclosed works outside of it, Fort Gregg and Fort
Whitworth. We thought it had now become necessary to carry them
by assault. About one o'clock in the day, Fort Gregg was assaulted
by Foster's division of the 24th corps (Gibbon's), supported by two
brigades from Ord's command. The battle was desperate and the
National troops were repulsed several times; but it was finally
carried, and immediately the troops in Fort Whitworth evacuated the
place. The guns of Fort Gregg were turned upon the retreating
enemy, and the commanding officer with some sixty of the men of
Fort Whitworth surrendered.
I had ordered Miles in the morning to report to Sheridan. In
moving to execute this order he came upon the enemy at the
intersection of the White Oak Road and the Claiborne Road. The
enemy fell back to Sutherland Station on the South Side Road and
were followed by Miles. This position, naturally a strong and
defensible one, was also strongly intrenched. Sheridan now came up
and Miles asked permission from him to make the assault, which
Sheridan gave. By this time Humphreys had got through the outer
works in his front, and came up also and assumed command over
Miles, who commanded a division in his corps. I had sent an order to
Humphreys to turn to his right and move towards Petersburg. This
order he now got, and started off, thus leaving Miles alone. The
latter made two assaults, both of which failed, and he had to fall
back a few hundred yards.
Hearing that Miles had been left in this position, I directed
Humphreys to send a division back to his relief. He went himself.
Sheridan before starting to sweep down to Petersburg had sent
Merritt with his cavalry to the west to attack some Confederate
cavalry that had assembled there. Merritt drove them north to the
Appomattox River. Sheridan then took the enemy at Sutherland
Station on the reverse side from where Miles was, and the two
together captured the place, with a large number of prisoners and

some pieces of artillery, and put the remainder, portions of three
Confederate corps, to flight. Sheridan followed, and drove them until
night, when further pursuit was stopped. Miles bivouacked for the
night on the ground which he with Sheridan had carried so
handsomely by assault. I cannot explain the situation here better
than by giving my dispatch to City Point that evening:
BOYDTON ROAD, NEAR PETERSBURG,
April 2, 1865.—4.40 P.M.
COLONEL T. S. BOWERS,
City Point.
We are now up and have a continuous line of troops,
and in a few hours will be intrenched from the
Appomattox below Petersburg to the river above.
Heth's and Wilcox's divisions, such part of them as
were not captured, were cut off from town, either
designedly on their part or because they could not help
it. Sheridan with the cavalry and 5th corps is above
them. Miles's division, 2d corps, was sent from the
White Oak Road to Sutherland Station on the South
Side Railroad, where he met them, and at last
accounts was engaged with them. Not knowing
whether Sheridan would get up in time, General
Humphreys was sent with another division from here.
The whole captures since the army started out
gunning will amount to not less than twelve thousand
men, and probably fifty pieces of artillery. I do not
know the number of men and guns accurately
however. * * * I think the President might come out
and pay us a visit tomorrow.
U. S. GRANT,
Lieutenant-General.
During the night of April 2d our line was intrenched from the river
above to the river below. I ordered a bombardment to be

commenced the next morning at five A.M., to be followed by an
assault at six o'clock; but the enemy evacuated Petersburg early in
the morning.

CHAPTER LXV.
THE CAPTURE OF PETERSBURG—MEETING
PRESIDENT LINCOLN IN PETERSBURG—THE
CAPTURE OF RICHMOND—PURSUING THE
ENEMY—VISIT TO SHERIDAN AND MEADE.
General Meade and I entered Petersburg on the morning of the 3d
and took a position under cover of a house which protected us from
the enemy's musketry which was flying thick and fast there. As we
would occasionally look around the corner we could see the streets
and the Appomattox bottom, presumably near the bridge, packed
with the Confederate army. I did not have artillery brought up,
because I was sure Lee was trying to make his escape, and I wanted
to push immediately in pursuit. At all events I had not the heart to
turn the artillery upon such a mass of defeated and fleeing men, and
I hoped to capture them soon.
Soon after the enemy had entirely evacuated Petersburg, a man
came in who represented himself to be an engineer of the Army of
Northern Virginia. He said that Lee had for some time been at work
preparing a strong enclosed intrenchment, into which he would
throw himself when forced out of Petersburg, and fight his final
battle there; that he was actually at that time drawing his troops
from Richmond, and falling back into this prepared work. This
statement was made to General Meade and myself when we were
together. I had already given orders for the movement up the south
side of the Appomattox for the purpose of heading off Lee; but
Meade was so much impressed by this man's story that he thought
we ought to cross the Appomattox there at once and move against

Lee in his new position. I knew that Lee was no fool, as he would
have been to have put himself and his army between two formidable
streams like the James and Appomattox rivers, and between two
such armies as those of the Potomac and the James. Then these
streams coming together as they did to the east of him, it would be
only necessary to close up in the west to have him thoroughly cut off
from all supplies or possibility of reinforcement. It would only have
been a question of days, and not many of them, if he had taken the
position assigned to him by the so-called engineer, when he would
have been obliged to surrender his army. Such is one of the ruses
resorted to in war to deceive your antagonist. My judgment was that
Lee would necessarily have to evacuate Richmond, and that the only
course for him to pursue would be to follow the Danville Road.
Accordingly my object was to secure a point on that road south of
Lee, and I told Meade this. He suggested that if Lee was going that
way we would follow him. My reply was that we did not want to
follow him; we wanted to get ahead of him and cut him off, and if he
would only stay in the position he (Meade) believed him to be in at
that time, I wanted nothing better; that when we got in possession
of the Danville Railroad, at its crossing of the Appomattox River, if
we still found him between the two rivers, all we had to do was to
move eastward and close him up. That we would then have all the
advantage we could possibly have by moving directly against him
from Petersburg, even if he remained in the position assigned him by
the engineer officer.
I had held most of the command aloof from the intrenchments, so
as to start them out on the Danville Road early in the morning,
supposing that Lee would be gone during the night. During the night
I strengthened Sheridan by sending him Humphreys's corps.

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