Audit and Assurance 2020

Audit and Assurance

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
(b) Discuss the following situations in the context of the independence of the auditor, showing
clearly the principles involved....................................................................................................2
(c) Concept .................................................................................................................................3
(d) Threats to objectivity.............................................................................................................3
QUESTION 2...................................................................................................................................4
(a) Procedures to be taken in regard of uncorrected misstatement ............................................4
(b) Going concern indicators.......................................................................................................4
QUESTION 3...................................................................................................................................6
(a) Audit risk and their types.......................................................................................................6
(b) Audit risk and auditor's response...........................................................................................7
(d) Difference between an interim and a final audit...................................................................8
(e) Procedure of interim audit and impact of final audit.............................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
The audit is the procedure of analysing all the accounting transactions that are recorded in
the accounting books. It is a s systematic review as well as analysis of information or documents.
Audit checks the accuracy of the financial statement whereas Assurance is procedure of
determining and utilised in the assessment of accounting transactions and financial statements. It
is a professional service with the goal of enhancing the quality as well as transparency of
transactions. Along with it helps to deduct the chances of problems that arise due to incorrect
information (Abdullah, Ismail and Smith, 2018). This aim of the report to understand nature and
importance of audit, roles & responsibilities within corporate framework. In this report consist of
credibility of the auditor, concept of going concern and audit procedure. Along with, identify
different audit risk and define the auditor's response for the planning.
QUESTION 1
(a)
Independence of the auditors define different parties that have a consideration in
outcomes of published financial statement in the organization. Along with, technical
independence ability, auditor independence consider as most essential aspect in establishing the
credibility of the audit point of view. The views of public is mainly concentrated on the auditor
on legit independence. There are mentioned below:
 Audit committee: In this committee consist of those people who are representative of
board of directors of business entity. The main responsibilities of members that provide
guidance to auditors to stay independent from management like committee should guide
for the audit conflicts rather than overseeing them.
 Size of audit firm: It is important feature that present of the independence of auditor scale
in the organization. The auditor mainly analysis of accounting transaction to know
accuracy of statements. In the large organisation audit will conduct on unbiased quality
audit services and appear to present strong analysis facilities as well as dependable
financial services (Barac and Williams, 2016). Moreover, audit procedure based on the
advanced technology and qualified people who will able to conducting large organisation
audits that related with smaller audit firms. Larger organisation audit consist of broad
customer portfolios that enable them to withstand management demands. Along with
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small entity offer customised service since their customer portfolios are smaller and they
will have to yield to the necessities of administration.
 Competitiveness degree in the audit service sector: Competition is defined as outer
impact on the independence of auditors. Customer can easily adapt services from other
auditors from different business entity that work in greatly competitive market can gave
problem staying independent.
 Tenure of audit firm that meets the interest of a particular client: This term related to
audit entity in which time of period require to meet a certain requirements of customers.
A good relationship with organisation and audit entity is applicant for close identification
of entity with its clients requirements and make it not possible for auditing entity to take
independent activities.
 Auditing size and non audit fees: The size of auditing based on the organisation size and
worth. IFAC's codes of ethics define that client size analysed on basis of fee level and
cast uncertainty in regard of the integrity of auditor. Overall fees charged by the customer
should not stand out a particular portion in regard of business turnover. Moreover, EFAA
defines that auditors tended to have been in agreement with the managers. In this
agreement consisting of illegal practices in regard of transparency scandals like Enron
and WorldCom. The main elements of reservation was the amount received from
customers towards non audit charges (Bożek and Emerling, 2016).
(b) Discuss the following situations in the context of the independence of the auditor, showing
clearly the principles involved
1. In this case not provided independence so Audit manager keeping securities in regard of
customers that direct impact on the auditor's point of view.
2. It is subjective in the nature but focused on different elements in which customer is
important source of income for auditors so total income is 700,000 out of which 100,000
is receivable by customers.
3. Due to lack of independence of audit, auditor has taken loan from the same bank in which
work as auditor position.
4. In this case no matter about the auditor so asked for providing suggestions. Such as audit
engagement is no necessary for checking honesty and independence of auditor.
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