Audit Assistant of a Firm - Essay Example

Auditing Answer i) Confidentiality is one of the professional standards which should be maintained by the professional accountant or audit assistant of a firm. An audit assistant should respect the confidentiality of information acquire as a result of business and professional relationships and should not disclose information to parties other than those involved in the contract unless there is a professional or legal duty or right to disclose. However, acquiring of confidential information as a result of the business and professional relationship should not be put to use for third parties advantage or that of auditors. The alternative adopted by the audit assistant is the information related to the Club casino has been carefully removed as far as its referencing is concerned. On the other hand, provision for safeguarding the information of the organization may be created against the leakage of information either by the professional or any employee associated with the company.1 ii) The duties of the company secretary cannot be performed by the engagement partner of Ace Limited audit because the engagement partner is not well versed with the work performed by the company secretary of the company. Moreover, the engagement partner is already assigned the tedious task of audit reporting, maintaining relation with the client. However, an engagement partner can be linked to other companies, so the laws that the company abides by should not be disclosed to an external individual as this may violate the law of confidentiality. As an alternative course of action to this violation the company should safeguard itself by appointing any close member from the company itself, like the internal auditor of the company. This way less chances will be there for the internal information of the company to leak out.2 Answer 2 i) Slipway Limited is in a situation where the company is facing constant decline for the past two years and the scope of cost cutting also seems difficult due to the purchase of imported machineries. These machineries were purchased so as to increase falling operations by carrying out the operations of the company more effectively. The bank providing loans to the company may be at whelm of an audit risk, whereby the documents of the company have every possibility of being overstated than the actual financial statements of the company. The audit risk particularly affects the transaction in the financial statement of accounts which portrays wrong information about the current financial position of the organization. However, the three specific components of audit risk that tends to get affected are the inherent risk generally associated with the material misstatement assuming no internal control procedures and policies; control risk where the risk is associated with the misstatement that may occur due assertion not prevented by the entity’s internal control; and detection risk where there are least chances for the auditor to detect the material misstatement in an assertion.3 ii) Until a CEO of a company is appointed officially he or she does not have the power to execute any decision taken on behalf of the company. It is the violation of the Company’s Act. Even when the CEO of the company takes a decision on changing the regulation of the strategy of the company, it has to be decided by other members of the Board before implementing the same. However, such an unlawful act so as to boost the occupancy rates of the company may put the company in audit risk to the extent of being legally dragged to the court of law.4 Under the three main audit risk, namely the inherent risk, the control risk and the detection risk the components can be verified. The inherent risk in this situation is the disclosure o the misstatement about the strategic marketing implementation before considering related controls. In control risk is the timely detection of the wrong act undertaken by the company by neglecting the internal control of the entity. In detection risk the capability of the auditor to notify the discrepancy thus caused by the company.5 However, the interrelationship of all the three components of the audit risk and there proper solution helps the concerned company in providing an audited report which is true in its entirety to its stakeholders. Answer 3 a) Since all the tests carried by Susan, under this comes the inspection, observation, external confirmation, re-calculation, re-performance and analytical procedures. After carrying out the entire test it has been concluded by Susan that the stocktaking of the company are in tandem with the auditing procedures of the company. Hence it can be agreed that the report presented by Susan for stocktaking is a correct one. b) Susan should have further recalculated the invoices thus presented by the sales clerk or rather few other sets should have been taken to verify the calculations portrayed in the sales in voice. The absence of the signature of the clerk raises question as to the presented documents was true or not. Hence further documentation should have been asked for to verify the entry thus posted in the invoices by the sales clerk. Thus on these grounds the audit report of Susan related to the sales invoices could not be readily accepted.6 c) Since the return generated by the firm is remarkable in comparison to the sales made in the initial period of the company does not support the reason to not tally the accounts on the grounds that the amount was immaterial with no further calculations required. Auditing is mainly done even for the minute transactions taking place so as to tap the forgery of the respective company. Thus the reason for rising profitability based on the sales presently generated needs to be audited properly.7 Bibliography “Audit and Risk Committee Charter”. WHL Energy Limited. Accessed August 14, 2012. http://www.whlenergy.com.au/irm/content/pdf/27-09-2011AuditRiskCommitteeCharter.pdf. “Audit Risk”. The Global body for Professional Accountants. Last modified November, 2009. http://www.accaglobal.com/content/dam/acca/global/pdf/sa_nov09_jones.pdf. “Code of Ethics for Professional Accountants”. Hong Kong Institute of Certified Public Accountants. Last modified December 31, 2010. http://app1.hkicpa.org.hk/ebook/HKSA_Members_Handbook_Master/volumeI/COE.pdf. Gray Iain & Manson Stuart. The Audit Process: Principles, Practice and Cases. United States: Cengage Learning, 2007. Johnstone Karla, Gramling Audrey & Rittenberg Larry E. Auditing. United States: Cengage Learning, 2011. Millichamp A. H. Auditing. United States: Cengage Learning, 2002. Pacini Carl J. “Materiality, Risk and Preliminary Audit Strategies”. Florida Gulf Coast University. Accessed August 14, 2012. http://ruby.fgcu.edu/courses/cpacini/courses/acg4632/audch8notes.pdf. Read More