Principles of Auditing : Assignment
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Added on 2021-06-14
Principles of Auditing : Assignment
Added on 2021-06-14
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Running head: PRINCIPLES OF AUDITINGPrinciples of AuditingName of the StudentName of the UniversityAuthor’s Note
1PRINCIPLES OF AUDITINGTable of ContentsPart A...............................................................................................................................................2Answer to Part A-1......................................................................................................................2Answer to Part A-2......................................................................................................................2Answer to Part A-3......................................................................................................................2Answer to Part A-4......................................................................................................................3Situation 1................................................................................................................................3Situation 2................................................................................................................................3Situation 3................................................................................................................................4Situation 4................................................................................................................................4Part B...............................................................................................................................................5Part C...............................................................................................................................................6Answer to Part C-1......................................................................................................................6Answer to Part C-2......................................................................................................................7Part D...............................................................................................................................................9References......................................................................................................................................11
2PRINCIPLES OF AUDITINGPart AAnswer to Part A-1The auditor of Billings & Associates is required to consider two ethical matters. The firstmatter is the continuous spill of toxic chemical into the rove from the manufacturing facility ofPharmaceuticals. The second ethical matter is the involvement of Pharmaceutical’s managementin covering up this spill in the river. The auditor needs to follow APES 110, Section 210,Professional Appointment to determine whether the audit engagement would lead to ethicalviolation of auditing principles (Doherty 2018).Answer to Part A-2The responsibility of the auditor lies in providing recommendations to Pharmaceuticalsfor the overall improvement of their internal control. Then the auditor is needed to providequalified audit opinion in order to make the major stakeholder inform about the hedging relatedissues the company is facing. As a part of qualified audit opinion, the auditor is responsible forproviding the explanation on the reasons for being qualified (William Jr, Glover and Prawitt2016). Answer to Part A-3In the process of auditing, all the terms and conditions along with the nature of auditengagement are listed in the audit engagement letter (Blay et al. 2014). Thus, both the auditorand the audit clients are required to go through this letter. The auditor of Billions & Associatesdelivered the audit engagement letter to Reaction Pty Ltd that includes all the details of the auditengagement. Thus, in the presence of this audit engagement letter, the audit client cannotconsider it as a review engagement.
3PRINCIPLES OF AUDITINGAfter that, the auditor should issue the Disclaimer of Audit Opinion for modified auditopinion. The main reason behind the issue of this audit opinion is the lack of required auditinformation due to the imposed restriction from the management of the audit client and theauditors cannot obtain enough information on accounts receivable as a result of lack ofdocumentation. This reason is enough to issue a disclaimer of audit opinion (William Jr, Gloverand Prawitt 2016). Answer to Part A-4Situation 1a.As per APES 110, Section 290.167, Self-review threat of audit independence ariseswhen the auditors provide accounting services, bookkeeping and other services to theaudit clients for the preparation of financial statements (apesb.org.au 2018). In the givensituation, the auditor creates self-review threat of audit independence by providingaccounting adjustments for impairment of assets.b.The most acceptable safeguard in this situation is the removal of this particular from theaudit engagement team of Hail Pty Ltd. Situation 2a.As per APES 110, Section 100.12, Advocacy Threat of audit independence arises whilethe auditor is involved in the promotion of the business of audit client (apesb.org.au2018). As per the provided situation, the auditor ensures Travel Time Ltd aboutrecommending their services to others due to satisfied by the services and this aspectraises advocacy threat of audit independence.
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