Auditing Risk and Auditor's Response

UGB238 AUDIT AND
ASSURANCE 2020/21

Table of Contents
INTRODUCTION...........................................................................................................................3

Question 1
A) Matters other than independence
The credibility in auditing involves the ability of impartial auditors to perform their auditing
practises reasonably and critically. Public opinion on audit integrity is based not only on a legal
autonomy but on their perception of independent audit.
1) Commission of Audit:
An auditor shall contain a designated amount, in lieu of monitoring, of the accountants of the
committee of members of the company whose key duties are to help auditors remain truly
independent.
2) Audit business scale
The size of the auditing business is an important aspect of the external auditors. An auditor's
credibility contributes to the performance of the report. The larger audit firms seem to be having
better analytical equipment and efficient accounting resources, more advanced technology and
much more professional professionals performing major corporate audits in compared to larger
accounting firm (Barr-Pulliam, Brown-Liburd and Sanderson, 2020). While large auditing firms
have a larger portfolio of clients that allow them to satisfy management criteria, smaller firms
have tailored services when they have narrower client ranges and must meet management needs
in desired time.
3) Participate in auditor sector competition
Competition was considered as an environmental force affecting the freedom of auditors. Since
the customer has convenient access to some other investigator's services, many businesses in a
dynamic environment cannot stand alone (Kend and Basioudis, 2018).
4) Auditing company which meets the needs of a specific customer
The audit company definition covers the period required to meet the auditing standards of a
single customer. A long relationship with a corporation and accountancy would certainly occur,
making it impossible for the Independent Auditor to pursue autonomous action, by binding the
company closely with the needs of its customers.
5) Scale and non-audit costs auditing:
IFAC Ethical principles suggest that an audit integrity should be challenged by a custodian's
scale as determined by the amount of the fee. The accounting professionals appeared to still be in
partnership with executive committee to try and conceal unlawful activities in transparency

circumstances. 'The (total) consumer charge does not surpass a certain portion of a global audit
scale,' says EFAA.
B) Following situations in the context of the independence of the auditor
I )The External Auditor owning shares throughout the business model, as shown in this situation,
is ineffective and can influence the judgement including its Accountant.
(ii) this situation is arbitrary in nature, but significant throughout this regard is that consumers
are the audit committee' main sources of revenue as the tax contribution is 700 000, 100 000 of
them being owed from customers.
(iii) In this situation there is a loss of external auditors since the accountant has loaned from the
investigator's own fund.
(iv) There really is no judgement of the accountant in such a situation, so the examiner is
required to offer advice, so there is no obligation to control the inspector's autonomy and
independence.
C) Explain the concept of objectivity, with reference to:
i) External Accountant: The international investigator is an auditing organisation that tracks,
investigates and does other business duties (Lu, Simnett and Zhou, 2019). Audit committees
which are performing their audit role externally are self-employed by companies in a form that
impartially reviews the financial statements and processes of internal enforcement of those firms.
This executive management recommendation is entirely consistent with clients and borrowers
that want an unbiased review of books of accounts.
ii) Internal Auditor: Internal audit become professional professionals who perform impartial or
neutral accounting and organisational financial regulatory audits. They are duty-bound to ensure
that businesses conform to legislation, respect the necessary protocols and work as efficiently as
possible. An unbiased contractor should be supplied with fair and accountable reports on the
organization.
(iii)
Threats: Whether an inspector is explicitly or indirectly involved or depends on the consumer for
substantial compensation, there is a risk of personality. There is a chance of personality in this
respect during the first situation because the accountant earns approximately 7% of his overall
profits from Bakers co.