Audit and Assurance- Document
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Added on 2020-02-24
Audit and Assurance- Document
Added on 2020-02-24
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AUDIT & ASSURANCE
AuditAnswer-1SituationThreats SafeguardsObjective AssessmentProvision of Book keeping services to the subsidiaries of the company to which audit services are being provided since 3 years.The main threat to audit independence the self-review threat. The threat is that the subsidiaries will be provided book keeping services by APG audit firm to SFL Limited and there is a risk that the auditors may manipulate the books in order to present a good position in the consolidated financial statements of the holding company SFLLtd. as the APG firm has been auditing the parent company since last 3 years and is aware of all the loopholes of the financial statements and is hence its reviewing own work shall be biased.The safeguards for this threat can be :i. The audit team should not be assigned book keeping of the subsidiaries1.ii. Book keeping should be assigned to a third party.In the case where bothfor holding and its subsidiaries there is only one auditor appointed there could be a case where his audit procedures could not be sufficient. Hence outsider team should be appointed for book keeping. In such case, auditor independence is difficult2.1Christine Jubb, Auditing and Assurance: A Business Risk Approach (Deakin University, 2012)2Karla, Johnstone, Audrey, Gramling & Larry E. Rittenberg, Auditing: A Risk Based-Approach to Conducting a Quality Audit (Cengage Learning, 2014)2
AuditAnswer-2SituationThreats SafeguardsObjective AssessmentThe senior auditor of AFG, Billie has been in the audit team of competitor company Alliance Ltd. for many years and now the company Alliance Ltd. is providing help to Billie in the form ofacting as guarantor of her loan.The main threat to audit independence the self-interest threat.The threat is that previous client is providing Billie help with regard to guarantee for her home loan. Billie mayexpect such kind of help from AFG Ltd. also in the future. Such expectations shall lead to self-interest threat3.The safeguards for this threat can be :i. The senior audit personnel should be rotated from time to time for every client4.ii. Policies and procedures shall be set so that auditor remuneration and feesshall be pre-determinedThe auditor's opinion may be affected because his client has obliged him by givinghim his guarantee for his home loan. So he may not correctly report his findings in the audit report. In such case, auditor independence is difficult.Answer-3SituationThreats SafeguardsObjective AssessmentThe senior partner auditor of AFG, Sandy is in the audit team of Sunbeam Ltd.and has received a high concession in hispersonal trip.The main threat to audit independence the self-interest threat.The threat is that client Sunbeam Ltd. has provided Sandy with 65% concession in a personal trip of Sandy and hence the auditor shall change her opinion after getting such nonfinancial benefits from the client.The safeguards for this threat can be :i. The senior audit personnel should be rotated from time to time for every client.ii. Policies and procedures shall be set so that auditor remuneration and feesshall be pre-determined.The auditor’s opinion may be affected because his client has obliged him by givinghim concession in his expenses for his personal trip. So he may not correctly report his findings in the audit report. In such case, auditor independence is difficult.3Karla, Johnstone, Audrey, Gramling & Larry E. Rittenberg, Auditing: A Risk Based-Approach to Conducting a Quality Audit (Cengage Learning, 2014)4Christine Jubb, Auditing and Assurance: A Business Risk Approach, 20123
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