Audit and Assurance Services
Quiz 7 :
Client Evaluation and Planning the Audit
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Q28 Q28 Q28
To adequately plan an audit, the auditor should obtain sufficient knowledge of the entity and its selection and application of accounting policies.This includes obtaining knowledge about the entity's business operations, investments, financing and financial reporting and accounting practices.For each of these areas, list two activities that the auditor would need to gain an understanding of.
Q29 Q29 Q29
Smith & Jones audit firm is determining whether to accept an audit engagement with Simple Things Ltd.As this would be a new engagement the audit firm sought the client's permission to contact the current auditor.The client did not give their permission, explaining that they did not want the current auditors to know they were thinking of changing. Recently Simple Things Ltd had been in the media for management not disclosing an environmental disaster that occurred at one of their plant sites.The incident is still under investigation but if the company is found to be at fault then they may be subject to numerous lawsuits from the many private landholders near the plant. From the information provided above, identify any reasons for not accepting the audit engagement with Simple Things Ltd.
Q32 Q32 Q32
Clements & Partners are the audit firm of Manufacturing Co and have been for 3 years.The audit firm is considering if there are any ethical or legal requirements that would prevent them from accepting the audit engagement of Manufacturing Co again this year.The audit partner has noted the following information which may be relevant to this decision. i.One of the junior staff members of the audit firm is related to a supervisor at Manufacturing Co. ii.One of the audit partners owns 100 shares in Manufacturing Co. iii.Clements & Partners provided taxation services to Manufacturing Co in the last financial year. iv.Frank Thomas, one of the audit partners at the firm, is the Uncle of one of the new directors of Manufacturing Co. v.The audit partner on this engagement for the last 3 years has been James Underwood. Identify if any of the above would prevent the audit firm from accepting the engagement.