Audit and Assurance

Audit and Assurance
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Contents
Audit and Assurance........................................................................................................................1
Question 1........................................................................................................................................3
(a).................................................................................................................................................3
(b).................................................................................................................................................4
(c).................................................................................................................................................4
Question 2........................................................................................................................................5
Question 3........................................................................................................................................7
REFERENCES..............................................................................................................................11
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Question 1
(a)
Audit credibility corresponds to the capability of external auditor, throughout his/her auditing
activities, to behave with honesty and objectivity. Public views on integrity of audits are focused
more on their interpretation of independence as auditor than on legit independence.
Independence: Auditor independence implies to independence state of internal as well as external
auditors from clients having financial interests within business that being audited. Here,
Independence need integrity as well as objective approaches within audit procedure.
Integrity: In relation to audit this requires that auditor should maintain integrity in financial,
commercial and professional relations. This not only implies honesty but also truthfulness and
dealing fairly.
Objectivity: This refers to state of mind that is concerned with all considerations required to
express independent opinion.
Professional competence: This relates to capabilities to effectively perform audit duties in
professional manner as well as performing specific professional task by applying skills with
relevant quality.
Confidentially: This fundamental aspect require that auditor should not disclose confidential and
personal details or information of client with other except client’s consent.
Professional behaviour: This includes imposition of key obligations on auditor to do compliance
with all the prescribed relevant guidelines, regulations, legislations and laws.
Included are:
1) Audit Committee:
Audit committee shall comprise of a specified number of representatives of board of
directors of corporation whose primary responsibilities are to assist auditors to stay independent
from management, i.e., committee should assist auditor in multiple audit conflicts instead of
overseeing them.
2) Size of audit firm
A significant feature that represents independence of auditor is the scale of the audit
company. The integrity of an auditor is specifically related to audit accuracy. Big-audit
companies will make certain to have impartial quality audit services as the bigger audit firms
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appear to provide stronger analysis facilities and reliable financial services, more modern
technologies and more qualified staff who'll be capable of conducting large business audits
relative to smaller audit firms (Barr-Pulliam, Brown-Liburd and Sanderson, 2020). Big audit
companies have higher customer portfolios that enable them to withstand management demands,
whereas small businesses offer customised services since their customer portfolios are smaller
and they'll have to yield to the requirements of management.
3) Competitiveness degree in the audit service sector
Competition described as external influence impacting the independence of auditors. As
the customer can quickly procure services from another auditor, several organisations that work
in a highly competitive market can have trouble staying autonomous.
4) Tenure of audit firm that meets the interests of a particular client
The term of audit company relates to the period of time needed to meet a particular
client's audit requirements. A long relationship with a corporation and accounting firm is
probable to occur in close identification of corporation with its customers' needs, making it
impossible for the auditing firm to take autonomous action.
5) Auditing size and non-audit fees:
IFAC's Codes of Ethics suggests that consumer size determined by fee level could cast
doubts about the integrity of auditor. "The (overall) fee for client should not surpass a certain
proportion of the overall audit company turnover, EFAA states plainly," The auditors tended to
have been in collusion with managers in covering illegal practises in contexts of transparency
scandals (such as the Enron and WorldCom). The key feature of reservation was the money the
auditors collected from clients towards non-audit fees.
(b).
(i) There is lack of independence as in this case Audit manager holding securities in the
client company which may affect Auditor’s opinion.
(ii) This case is subjective in nature, but considerable aspect here is that client is major
source of income for auditor since total income is 700000 out of which 100000 is
receivable by client.
(iii) There is also lack of independence of audit in this case as auditor has taken loan form
the same bank in which she is auditor.
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