Principles of Auditing | Report

Running head: AUDIITING
Auditing
Name of the Student
Name of the University
Author’s Note

1AUDIITING
Table of Contents
1) Executive Summary.......................................................................................................2
2) Analysis of Issues..........................................................................................................4
Potential Issue 1.............................................................................................................4
Potential Issue 2.............................................................................................................5
Potential Issue 3.............................................................................................................6
References.........................................................................................................................8

2AUDIITING
1) Executive Summary
The main purpose of this report is the assessment of three individual situations in
the audit of Peechee Ltd by Pines, Dent and Woods (PDW) where there might be
possible threat to audit independence. The discussion shows the presence of three
different types of ethical issues in the provided situations. In the first case, the ethical
case is associated with the long relationship between the auditor and audit client. This
long relationship can create self-interest threat of audit independence as the PDW wight
work give audit judgment in the favor of Peechee Ltd for maintaining the long relation
with the client. The recommended steps include changing the roles of audit personnel in
the team, appointing a reviewer for review the audit work of the engagement and
ensuring reviewing the internal and external audit quality on regular basis. In the second
case, the issue is associated with the presence of financial interest of the auditor in the
audit client. This financial interest of the auditor in the audit client can create negative
influence on the behavior or judgment of the auditor and can create self-interest threat
to audit independence. The recommended actions to reduce this threat include
appointing an external reviewer for review the audit work of that particular individual and
ensuring regular review of the internal and external audit quality. In the third case, the
ethical issue related to the delivery of valuation related non-audit service to Peechee Ltd
by PDW which can lead to the development of self-review of advocacy threat of audit
independence. These threats to independence can be created due to the fact that this
valuation related non-audit service will create material impact on the financial
statements of Peechee Ltd. At the same time, continuing with the audit of Peechee Ltd
in the presence of this threat to independence can create threat to fundamental