Financial Analysis of Sandars Brothers

Running head: AUDITING IN CONTEXT
Auditing in Context
Name of the Student
Name of the University
Author’s Note

AUDITING IN CONTEXT1
Table of Contents
Task 1: Sanders Brothers...........................................................................................................2
Requirement (a)......................................................................................................................2
Requirement (b).....................................................................................................................3
Task 2: Somerset Co..................................................................................................................3
Requirement (a)......................................................................................................................3
Requirement (b).....................................................................................................................4
Task 3: Smith Phones.................................................................................................................5
Requirement (a)......................................................................................................................5
Requirement (b).....................................................................................................................6
References..................................................................................................................................8

AUDITING IN CONTEXT2
Task 1: Sanders Brothers
Requirement (a)
According to the provided case of Sanders Brothers, there is a need for issuing
qualified audit opinion as one of the major customers of Sanders Brothers is in great financial
difficulty and the company has not made any provision against the material debt owed; this
raises going concern issue within Sanders Brothers. Since Jones & partners is involved in
providing major non-audit services to the company, issue of qualified opinion would likely to
be removed them as the audit partner of Sanders Brothers by the directors along with
providing non-audit services. In line with Section 110, Para 110.1 A1 of International Code
of Ethics for Professional Accountants, the audit principle of Objectivity puts the obligation
on the auditors not to compromise business or professional judgments as a result of bias,
conflict of interest or unnecessary influence; and the principle of Honesty states that the
auditors need to be open and honest in the profession (ifac.org 2020). Therefore, Jones &
partners would violate these principles in case qualified opinion is not issued. Apart from
this, Para 600.2 of Section 600 states that the delivery of non-audit services to the audit client
can contribute to the development of threat of complying with the major principles along with
the threat to independence (ifac.org 2020). As the revenue of Jones and partners from non-
audit services to Sanders Brothers is twice as much as the revenue from auditing service,
there is greater chance of the development of above-mentioned threat due to the delivery of
non-audit services. Therefore, issuing unqualified opinion along with delivering the non-audit
services would violate the fundamental principles of auditing along with developing threat to
independence. Therefore, irrespective of the threat of removal by the directors of Sanders
Brothers, the auditors of Jones and partners should issue qualified audit opinion as per the
ethical principles of auditing profession (Omid 2015).