Ask a question from expert

Ask now

ACT504 Auditing Theory Assignment Solution

13 Pages4412 Words612 Views
   

Added on  2019-10-30

ACT504 Auditing Theory Assignment Solution

   Added on 2019-10-30

BookmarkShareRelated Documents
AUDITING THEORY
ACT504 Auditing Theory Assignment Solution_1
Audit theoryAnswer part A-1A whole lot of circumstances should be taken into attention about the client and his business, whenever an auditor fixes up an appointment with a company. The most crucial point that should be taken into account by the auditor at the earliest is that all the authorized rules are followed by the management of the company. For instance, whether the client is keeping a check if his business is in association with the protection of the environment and no harm is done to the ecosystem. It is important to stay at the distance from the unauthorized means and manipulative policies (Arens et. al, 2013).As per the details of the case, the Pharmaceuticals Ltd is found to be guilty of the charge of dispatching its harmful chemical wastes into the nearby river and thus contributing to water pollution which is a very unethical practice. Involvement of the management is such a practice and the consequences of this matter should be paid full attention by the auditor while making an auditing appointment (Heeler, 2009). It is the duty of the auditor to highlight all the unethical means followed by the company regarding the destruction of the environment and shown the same in their reports so as to summon the people at large. So it the responsibility of the auditor to conclude that is the company guilty of the charges that have been put on the same. Answer part A-2In cases similar to the one of Pharmaceuticals Ltd, if on knowing the manipulative and the unethical means followed by the company on a large scale, if the management is not getting involved in presuming and setting things correctly, then the auditor should step forward and take the following actions:First of all the auditor should look into the financial statements of the company so as to detect any false data placed in it which did not come into the eye of the management which is enough to fool the shareholders. The auditor should efficiently categorize the false data and measure its effect on the auditor’s report. If thesituations are worsening then the auditor has the full right to undertake assessment procedures to fix the problems. It is the duty of the auditor to detect any flaws in the financial statements related to the manipulative data put up by the management. All the concept of the audit should be thoroughly applied by the auditor under these circumstances before questioning the reliability of the management of the company (Black, 2010).2
ACT504 Auditing Theory Assignment Solution_2
Audit theoryIt is very obvious that the Pharmaceuticals Ltd would have carried out a number of manipulative transactions illegally so as to capture and control the seriousness of the matter rather than disclosing it to the public. It is thus the duty of the auditor to detect all those transactions and also to find the steps deliberately followed to record such transactions. Strictness should be maintained by the auditor in each and every flaw made by the company. As in this case, it was seen that the management was weak enough so as to control the manipulative steps taken and in such cases the work of the auditor increases as it is expected that the steps followed by the auditor will be strictly effective and positive in nature (Messier, 2013). Answer part A-3Reaction Pvt Ltd received the appointment letter for conducting an audit in the Billing & Associates Company. The letter was approved and accepted with respect by the Reaction Pvt Ltd. While carrying out the audit procedures in order to finalize the report, a situation of absence of documentation aroused which had relation with the transactional receivables of the company. Under this circumstance, it was decided that a manipulated report will be shown to the public.It is also possible that the company can cancel the audit letter and ask the latter to only check the position of the company which is enough to define its status. This shows that the working of the audit company is very much confined. It is also seen that the company now proclaims that no audit is needed at this time. This questions the audit company as to why it accepted the letter if their no need of it at present. But this also highlights that the Billing & Associates Company is putting effort to conceal its mistakes of the absence of documents. This can beguaranteed because of the proclamation made by the company just after all the audit procedures have been strictly completed (Wood, 2011). But it is also necessary to issue the finalized report which was made in absence of the documents on the part of the invitee company. Answer part A-4Many conditionsarise which confine the independence of the auditor with a term involve called “self-review”. If a company has been following manipulative methods then it is the duty of the auditor to inform the effects of such practices on the financial statements. But it should be kept in mind that the duty of the auditor is only to inform the management and not to suggest ways in which the following practices can be controlled and situations can be made the batter (Cappelleto, 2010). If this happens then the auditor has no right to check the modified and updated financial statements as he himself had suggested the ways to change it. 3
ACT504 Auditing Theory Assignment Solution_3
Audit theoryMaintaining the independence of self-review of the auditors is very much important for an auditor so to present a checked and legal picture of the company without any flaws. A major threat can be a self-interest threat. For instance, if the client asks for the travel services recommendation and the same is not given by the auditors then it can result in the auditor firm losing its client. This can be avoided if the auditor is at par with the client and maintains an only professional relationship with them. It must also be seen that the auditor should reject any piece of work which is not included in the contract. If any pressure is maintained on the auditor then the audit company must break the contact so as to keep the independence of the auditor at the first priority (Vause, 2009). Familiarity threat can also be a case with an auditor as the wife of one of the auditors is holding a good amount of shares in the company. This kind of threat takes place when the auditor pays much affection in the form of affection towards the company so as to safeguard the profits of the ones in close contact (Carcello, 2012). This can be avoided if any other charted accountant from any other company is appointed in order to check the reports prepared by the previous auditor who was getting sympathetic towards the company.Intimidation threat arises when the auditor hints the fact that he is not going to be paid for all the hard work he has done. Creation of a doubt is the basis of this threat. Though there is no direct action by the client ofnon-payment of the fess the matter is suspected by the auditor due to the course of actions followed by the client. This threat can be avoided if the auditor demands his fees from the client before submitting the final report to the company management. This is done so as to guarantee the fees receiving because if the report is submitted then there can be a chance that the auditor doesn’t get paid (Church et. al, 2008). 4
ACT504 Auditing Theory Assignment Solution_4

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Audit In Business || Assignment
|14
|3800
|71

Questions Global Pandemic
|6
|1189
|295

Auditing Theory and Practice: Report
|5
|1390
|70

ASA 701 and Auditing Procedures for Material Misstatement and Green Machine Ltd
|12
|3412
|145

Analysis of the Enron Scandal
|6
|817
|339

Basic Understanding of Key Auditing Concepts
|6
|1481
|400