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Audit of client Linstead Parva plc - Essay Example

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This essay "Audit of client Linstead Parva plc" dwells on the issues of audit in Linstead Parva plc. Reportedly, the auditing standards strictly prohibit the acceptance of any unusual tokens from the client which the client does not offer regularly…
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Download file to see previous pages (Independence Provisions Applicable to Audits of Public Interest) The potential threats that may flow are: The acceptance of the staff scheme will cause significant influence on the decision and the professional judgment of the audit team members. The team will not be independent during the course of the audit due to possibility of significant benefits that will aid the team which will impair their objectivity. The audit objective will not be attainted as the members of the team will not be able to exercise proper skepticism during the course of the audit which may impair the objectivity of the audit. (Audit Ethics) Solution It is strictly advised to the members of the Tick and Bash LLP, which are involved in the course of the audit, not to accept significant gifts from Linstead Parva which may impair their objectivity and professional skepticism during the course of the audit. The engagement partner should also make sure, in light of the code of ethics, that any other token or gift which may impair the objectivity is not accepted from the Linstead Parva plc. RELATIONSHIP WITH EMPLOYEE OF AUDIT CLIENT One of the junior accountant working at the CPD (Development) Ltd has become engaged to be married to the son of the engagement partner and since CPD (Development) Ltd is a 100% owned subsidiary of a jointly controlled entity of Linstead Parva plc, i.e. CPC Ltd, there also arises a risk that the audit engagement partner may exercise influence on the team members of the audit team where a matter arises during the course of the audit. However, there can be an argument that the risk will not be very substantial as the person to...
It is strictly advised to the members of the Tick and Bash LLP, which are involved in the course of the audit, not to accept significant gifts from Linstead Parva which may impair their objectivity and professional skepticism during the course of the audit.
The engagement partner should also make sure, in light of the code of ethics, that any other token or gift which may impair the objectivity is not accepted from the Linstead Parva plc.
RELATIONSHIP WITH EMPLOYEE OF AUDIT CLIENT
One of the junior accountant working at the CPD (Development) Ltd has become engaged to be married to the son of the engagement partner and since CPD (Development) Ltd is a 100% owned subsidiary of a jointly controlled entity of Linstead Parva plc, i.e. CPC Ltd, there also arises a risk that the audit engagement partner may exercise influence on the team members of the audit team where a matter arises during the course of the audit.
However, there can be an argument that the risk will not be very substantial as the person to whom the audit engagement partner's son is engaged to, is only a junior accountant at CPD (Development) Ltd. But the code of ethics has clearly said forth that "Such relationships must be avoided with the audit clients which tend to prejudice, bias or even influence the objectivity of the auditor".
The risk can be mitigated by lowering the level of reliance placed on the work performed at the audit of CPD (Development) Ltd and exercising extra amount of skepticism when dealing with the particular accountant. ...Download file to see next pagesRead More
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