- The document discusses ethical considerations for an audit firm, Ahmed & Co., regarding an invitation to provide assurance services on key performance indicators (KPIs) in a sustainability report for their listed audit client Federal Express Ltd.
- Objectivity and independence threats must be carefully considered due to the non-audit nature of the work and Federal Express Ltd.'s status as a major client. Competence in assurance of sustainability reporting must also be established.
- The scale of the engagement, with 75 KPIs to verify, and time pressure to complete the work in 4 weeks may pose challenges given the global nature of the client and newly established assurance department. Fees and profitability would need to be negotiated accordingly.
The document discusses the use of phosphates in power plant chemistry. It describes phosphate treatment which uses various forms of phosphates like trisodium phosphate to prevent scale and corrosion in boilers. It outlines the reactions that occur during phosphate treatment and highlights hazards like irritation from inhalation or skin contact with phosphates. The document provides guidance on handling, storage, personal protective equipment and first aid measures for phosphates.
The "Big 4" audit firms - PricewaterhouseCoopers, Ernst & Young, KPMG, and Deloitte - dominate the global financial audit market. While they audit most large multinational companies, concerns have been raised about risks to audit quality from a lack of competition. Some proposals to address this include mandatory audit firm rotation or increased regulatory oversight of the audit process. However, others argue this could increase costs for companies without necessarily improving quality. Overall, there is debate around how to strengthen independence and effectiveness within the concentrated global audit industry.
The document contains quiz questions and solutions related to Chapter 7 on auditing internal controls. It addresses topics like the responsibilities of management and auditors in assessing internal controls over financial reporting, the objectives of internal control, and an auditor's responsibilities to consider fraud and errors. Key objectives of auditing internal controls are to form an opinion on their effectiveness in preventing material misstatements and to evaluate controls over financial statement disclosures. Auditors must test internal controls rather than rely solely on the work of others.
The document is a knowledge level exam paper from the Institute of Chartered Accountants of Bangladesh. It contains questions on assurance, internal control, internal and external audit. The paper covers key concepts in these areas like the two types of assurance engagements, objectives of internal control, components of internal control like control environment and risk assessment process, roles of internal and external audit functions and key differences between them. It provides suggested answers to questions testing understanding of these fundamental assurance, internal control and audit concepts.
The document discusses the final stages of an audit, including assembling audit evidence, evaluating results, communicating findings, and completing the audit. It notes that auditors must evaluate audit evidence objectively, draft reports to communicate issues and conclusions, and ensure quality control procedures are followed to complete the audit properly. Post-audit responsibilities involve monitoring corrective actions, reviewing for subsequent events, and retaining workpapers for the required retention period.
The stages of auditing are as follows: determine audit approach, understand the entity, assess risk of material misstatement, select audit procedures, prepare report, and report to management. Auditors determine risks, formulate responses like additional procedures, and test controls and substantive procedures. Audit risk is the risk of giving an inappropriate opinion and comes from inherent, control, and detection risk. Business risk impacts the organization directly from operations.
The document discusses the use of phosphates in power plant chemistry. It describes phosphate treatment which uses various forms of phosphates like trisodium phosphate to prevent scale and corrosion in boilers. It outlines the reactions that occur during phosphate treatment and highlights hazards like irritation from inhalation or skin contact with phosphates. The document provides guidance on handling, storage, personal protective equipment and first aid measures for phosphates.
The "Big 4" audit firms - PricewaterhouseCoopers, Ernst & Young, KPMG, and Deloitte - dominate the global financial audit market. While they audit most large multinational companies, concerns have been raised about risks to audit quality from a lack of competition. Some proposals to address this include mandatory audit firm rotation or increased regulatory oversight of the audit process. However, others argue this could increase costs for companies without necessarily improving quality. Overall, there is debate around how to strengthen independence and effectiveness within the concentrated global audit industry.
The document contains quiz questions and solutions related to Chapter 7 on auditing internal controls. It addresses topics like the responsibilities of management and auditors in assessing internal controls over financial reporting, the objectives of internal control, and an auditor's responsibilities to consider fraud and errors. Key objectives of auditing internal controls are to form an opinion on their effectiveness in preventing material misstatements and to evaluate controls over financial statement disclosures. Auditors must test internal controls rather than rely solely on the work of others.
The document is a knowledge level exam paper from the Institute of Chartered Accountants of Bangladesh. It contains questions on assurance, internal control, internal and external audit. The paper covers key concepts in these areas like the two types of assurance engagements, objectives of internal control, components of internal control like control environment and risk assessment process, roles of internal and external audit functions and key differences between them. It provides suggested answers to questions testing understanding of these fundamental assurance, internal control and audit concepts.
The document discusses the final stages of an audit, including assembling audit evidence, evaluating results, communicating findings, and completing the audit. It notes that auditors must evaluate audit evidence objectively, draft reports to communicate issues and conclusions, and ensure quality control procedures are followed to complete the audit properly. Post-audit responsibilities involve monitoring corrective actions, reviewing for subsequent events, and retaining workpapers for the required retention period.
The stages of auditing are as follows: determine audit approach, understand the entity, assess risk of material misstatement, select audit procedures, prepare report, and report to management. Auditors determine risks, formulate responses like additional procedures, and test controls and substantive procedures. Audit risk is the risk of giving an inappropriate opinion and comes from inherent, control, and detection risk. Business risk impacts the organization directly from operations.
Case Study Of Rajendra K Goel &Amp; CompanyNicole Fields
- Kudler Fine Foods has implemented an industry-specific accounting information system which helps ensure accurate financial reporting.
- Using computer-assisted audit tools and techniques (CAATTs) would make auditing Kudler's systems and records more efficient and effective. CAATTs allow auditors to analyze large amounts of electronic data.
- CAATTs can help validate the integrity of Kudler's systems by testing for accuracy and completeness of data. This enhances the reliability of financial reporting and protects against security risks or errors.
- Implementing CAATTs would benefit both Kud
This document discusses several topics related to auditing:
1) Matters that could indicate non-compliance with laws and regulations by management, such as unusual payments, transactions with tax havens, and improperly recorded transactions.
2) The importance of disclosing accounting policies used and any changes to those policies.
3) That guidance notes are recommendatory for auditors but some are considered mandatory.
4) That inquiry, seeking information from knowledgeable individuals, is an important audit procedure used to obtain evidence.
The document discusses a plan to evaluate the usability and effectiveness of implementing a new computerized provider order entry (CPOE) system at a healthcare facility before deployment. The goals are to appraise the usability of the CPOE system and provide administrators with data on successful implementation. The evaluation plan will use a survey to assess clinician workflow and satisfaction before and after deployment. Literature on CPOE systems suggests user interface design, training, and support are key to acceptance and performance. The findings will help optimize the CPOE system and its impact on clinical workflow.
Professional skepticism plays an important role in auditing by requiring auditors to question documents and statements, assess evidence critically, look beyond the obvious, and pay close attention to potential fraud. In the case of Imperial Valley, the auditors likely lacked sufficient professional skepticism as they failed to detect major issues with the company's operations and financial reports over several years. Proper professional skepticism involves diligent, persistent scrutiny that could have uncovered Imperial Valley's misstatements earlier.
This document discusses several measures to enhance audit quality and improve standards of corporate governance in India. It outlines various enablers of audit quality including assessing the audit ecosystem, enhancing the role of audit committees, building capacity through larger audit firms, establishing a center of excellence for audit quality, and using tools and technology in audits. It also discusses the need for auditors to take a deeper look at critical areas like related party transactions, going concern assumptions, and documenting audit evidence. Overall it emphasizes the importance of a constructive regulatory regime that focuses on remediation over disproportionate punishment to encourage high standards of auditing.
The audit committee plays an important role in overseeing the financial reporting process and audit of a company's financial statements. The key responsibilities of an audit committee include:
1. Overseeing and monitoring the financial reporting process to ensure accuracy and compliance.
2. Appointing, compensating, and overseeing the independent auditor.
3. Reviewing and discussing the audit plan, audit results, and auditor's report with the independent auditor.
4. Reviewing the adequacy of the company's internal controls and risk management procedures.
The audit committee helps provide oversight of management, the internal auditors, and the independent auditor to strengthen the integrity of financial reporting and maintain public trust in the
This document does not contain a summary as it is a collection of fragmented text and does not convey complete ideas or information. The document includes discussions of auditor independence, contingent fees, threats to objectivity, and other audit-related topics but does not integrate these ideas into coherent paragraphs or provide an overall summary.
DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...Beth Hall
Here are the key points regarding the independence of an external auditor:
- Auditor independence refers to the independence of the auditor from parties that may have a financial interest in the business being audited. Independence requires integrity and an objective approach.
- Independence is important to ensure the auditor can carry out their work freely and objectively. It enhances the credibility of the financial statements by providing reasonable assurance from an independent source that they present a true and fair view.
- There are three main types of independence - financial independence, management independence, and programming independence. Financial and management independence prevent conflicts of interest. Programming independence allows auditors freedom in their audit approach.
- Threats to independence include things like a non-audit
The document is an internal audit report that identifies two control weaknesses at a company. The first weakness is that the internal auditors report directly to the CEO, compromising their independence and objectivity. The second weakness is that a machine operator's pay is contingent on production, increasing the risk of fraud. The report recommends the auditors report to the audit committee instead of the CEO to be independent. It also notes the fraud risk from the incentive-based pay system.
This report analyzes the internal controls and accounting system of Chic Paints Ltd. It examines the company's history, current accounting systems, and compliance with external standards and regulations. The report also identifies key internal stakeholders and evaluates the accounting department, record keeping, training, and ethical practices. Recommendations are provided to improve internal controls, minimize fraud risk, and invest in a more sophisticated accounting software package and staff training. Implementing the recommendations would enhance reporting, working capital management, staff morale, and reduce fraud while ensuring compliance.
This document provides an overview of an audit and assurance master class that covers several key areas:
1) Audit framework and regulation, which focuses on laws and regulations that affect audits and the responsibilities of management and auditors.
2) Planning and risk assessment, including the importance of understanding audit risk and assessing risks of material misstatement.
3) Multiple topics are covered in detail, including internal control, audit evidence, and review and reporting.
The class emphasizes the relevance of standards like ISA 250 and ISA 315 for understanding audit objectives and risk assessment procedures. It also defines key terms like non-compliance and inherent risk.
For more course tutorials visit
www.newtonhelp.com
1.Developing an understanding of the client's business and industry is essential to proficiency as discussed in the general standards of GAAS. (Points: 4)
The document discusses several topics related to auditing:
1. It explains the importance of auditing financial statements and ensuring their reliability for management decision making and for investors. Auditing provides assurance that accounting statements are authentic.
2. It discusses the objectives of an independent audit are to obtain reasonable assurance that financial statements are free from material misstatement and to report findings.
3. It outlines specific inquiries an auditor makes of management to evaluate subsequent events that may affect financial statements, such as new commitments, sales, increases in debt or capital, asset losses, or accounting adjustments.
The audit found that the company had not performed an ABC analysis of suppliers to classify them based on spending amounts. This results in purchasing activities not focusing on key suppliers. It was also found that local purchases were only from one supplier and overseas purchases lacked competitive bidding. The audit recommends the company conduct an ABC analysis to identify key suppliers and invite competitive bids for large-value purchases.
CHAPTER 1 This list below indicated various audits, attestation,.docxzebadiahsummers
CHAPTER 1: This list below indicated various audits, attestation, and other engagements involving auditors.
1. A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.
2. An auditor’s report on whether the financial statements are fairly presented in accordance with International Financial Reporting Standards.
3. An engagement to help a company structure a merger transaction to minimize the taxes of the combined entities.
4. A report stating whether the company has complied with restrictive covenants related to officer compensation and payment of dividends contained in a bank loan agreement.
5. A report on the effectiveness of internal controls at a company that provides payroll processing for other companies.
6. An examination report stating whether a company’s statement of greenhouse gas emissions is presented in conformity with standards issued by the World Business Council for Sustainable Development and the World Resources Institute.
7. Evaluating the voting process and certifying the outcome for Rolling Stones Magazine’s “Greatest Singer of All Time” poll.
8. A report indicating whether a governmental entity has compiled with certain government regulations.
9. A review report that provides limited assurance about whether financial statements are fairly stated in accordance with U.S. GAAP.
10. A report about management’s assertion on the effectiveness of controls over the availability, reliability, integrity, and maintainability of its accounting information system.
11. An evaluation of the effectiveness of key measures used to assess an entity’s success in achieving specific targets linked to an entity’s strategic plan and vision.
Required
a. Explain the relationships among audit services, attestation services, and other assurance and no assurance services provided by CPA’s.
b. For each of the services listed above, indicate the type of service from the list that follows.
(1) An audit of historical financial statements.
(2) An attestation service other than an audit service.
(3) An assurance or no assurance service that is not an attestation service.
1-21. Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend James Foley asks, him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.”
a. Identify ways in which a financial statement audit adds value for clients.
b. List other services other than audits that Czarnecki and Hogan likely provides.
c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that .
The document discusses internal audit and review reports. It explains that internal auditors, external auditors, and consultants provide reports to management that provide evidence of work performed, conclusions reached, and recommendations made. The quality of these reports is important for adding value. Draft reports are often discussed with management and responses are incorporated. External auditor reports deal with issues relating to internal controls, weaknesses in systems, and recommendations. Internal audit engagements have a variety of objectives as part of corporate governance arrangements.
Advanced Auditing and assurance ,chapter1seidIbrahim2
The document provides an overview of auditing, including:
1. The origins and evolving definitions of auditing from verifying accounts to determining fairness in financial statements.
2. The increased demand for auditing due to factors like separation of ownership and control, regulatory requirements, and complexity of financial information.
3. The key differences between accounting, which prepares financial information, and auditing, which evaluates the reliability of that information and the processes that generated it.
The Auditor’s Responsibility To Consider Fraud And Error...Tina Jordan
Here is a draft essay about the case of Surfer Dude Duds, Inc:
Surfer Dude Duds, Inc. faced significant challenges due to mismanagement and lack of proper financial controls. As the company grew rapidly, the founders Joe and Bob failed to implement accounting systems and oversight to ensure the financial statements accurately reflected the business. This led to several issues.
First, without an inventory tracking system, it was impossible for Surfer Dude Duds to know the true value of its inventory or cost of goods sold. Relying on estimates and manual records left huge room for error. With thousands of items flowing through multiple retail locations, an accurate count was nearly impossible without technology support. This likely resulted in material
1. The National Board of Revenue (NBR) is calling for applications from eligible candidates to participate in the VAT Officer (VO) recruitment exam-2017 in accordance with the VAT Act of 1984 and VAT Rules of 1984.
2. Candidates must have a bachelor's or master's degree in subjects like law, accounting, banking or finance from a recognized university in Bangladesh or abroad. Applications must be submitted online by March 31, 2017 along with required documents.
3. The written exam will have questions on tax laws, accounting and finance. It will carry 100 marks over 3 hours, and an oral exam carrying 50 marks will also be conducted. The exam date will be notified later via notice.
Case Study Of Rajendra K Goel &Amp; CompanyNicole Fields
- Kudler Fine Foods has implemented an industry-specific accounting information system which helps ensure accurate financial reporting.
- Using computer-assisted audit tools and techniques (CAATTs) would make auditing Kudler's systems and records more efficient and effective. CAATTs allow auditors to analyze large amounts of electronic data.
- CAATTs can help validate the integrity of Kudler's systems by testing for accuracy and completeness of data. This enhances the reliability of financial reporting and protects against security risks or errors.
- Implementing CAATTs would benefit both Kud
This document discusses several topics related to auditing:
1) Matters that could indicate non-compliance with laws and regulations by management, such as unusual payments, transactions with tax havens, and improperly recorded transactions.
2) The importance of disclosing accounting policies used and any changes to those policies.
3) That guidance notes are recommendatory for auditors but some are considered mandatory.
4) That inquiry, seeking information from knowledgeable individuals, is an important audit procedure used to obtain evidence.
The document discusses a plan to evaluate the usability and effectiveness of implementing a new computerized provider order entry (CPOE) system at a healthcare facility before deployment. The goals are to appraise the usability of the CPOE system and provide administrators with data on successful implementation. The evaluation plan will use a survey to assess clinician workflow and satisfaction before and after deployment. Literature on CPOE systems suggests user interface design, training, and support are key to acceptance and performance. The findings will help optimize the CPOE system and its impact on clinical workflow.
Professional skepticism plays an important role in auditing by requiring auditors to question documents and statements, assess evidence critically, look beyond the obvious, and pay close attention to potential fraud. In the case of Imperial Valley, the auditors likely lacked sufficient professional skepticism as they failed to detect major issues with the company's operations and financial reports over several years. Proper professional skepticism involves diligent, persistent scrutiny that could have uncovered Imperial Valley's misstatements earlier.
This document discusses several measures to enhance audit quality and improve standards of corporate governance in India. It outlines various enablers of audit quality including assessing the audit ecosystem, enhancing the role of audit committees, building capacity through larger audit firms, establishing a center of excellence for audit quality, and using tools and technology in audits. It also discusses the need for auditors to take a deeper look at critical areas like related party transactions, going concern assumptions, and documenting audit evidence. Overall it emphasizes the importance of a constructive regulatory regime that focuses on remediation over disproportionate punishment to encourage high standards of auditing.
The audit committee plays an important role in overseeing the financial reporting process and audit of a company's financial statements. The key responsibilities of an audit committee include:
1. Overseeing and monitoring the financial reporting process to ensure accuracy and compliance.
2. Appointing, compensating, and overseeing the independent auditor.
3. Reviewing and discussing the audit plan, audit results, and auditor's report with the independent auditor.
4. Reviewing the adequacy of the company's internal controls and risk management procedures.
The audit committee helps provide oversight of management, the internal auditors, and the independent auditor to strengthen the integrity of financial reporting and maintain public trust in the
This document does not contain a summary as it is a collection of fragmented text and does not convey complete ideas or information. The document includes discussions of auditor independence, contingent fees, threats to objectivity, and other audit-related topics but does not integrate these ideas into coherent paragraphs or provide an overall summary.
DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...Beth Hall
Here are the key points regarding the independence of an external auditor:
- Auditor independence refers to the independence of the auditor from parties that may have a financial interest in the business being audited. Independence requires integrity and an objective approach.
- Independence is important to ensure the auditor can carry out their work freely and objectively. It enhances the credibility of the financial statements by providing reasonable assurance from an independent source that they present a true and fair view.
- There are three main types of independence - financial independence, management independence, and programming independence. Financial and management independence prevent conflicts of interest. Programming independence allows auditors freedom in their audit approach.
- Threats to independence include things like a non-audit
The document is an internal audit report that identifies two control weaknesses at a company. The first weakness is that the internal auditors report directly to the CEO, compromising their independence and objectivity. The second weakness is that a machine operator's pay is contingent on production, increasing the risk of fraud. The report recommends the auditors report to the audit committee instead of the CEO to be independent. It also notes the fraud risk from the incentive-based pay system.
This report analyzes the internal controls and accounting system of Chic Paints Ltd. It examines the company's history, current accounting systems, and compliance with external standards and regulations. The report also identifies key internal stakeholders and evaluates the accounting department, record keeping, training, and ethical practices. Recommendations are provided to improve internal controls, minimize fraud risk, and invest in a more sophisticated accounting software package and staff training. Implementing the recommendations would enhance reporting, working capital management, staff morale, and reduce fraud while ensuring compliance.
This document provides an overview of an audit and assurance master class that covers several key areas:
1) Audit framework and regulation, which focuses on laws and regulations that affect audits and the responsibilities of management and auditors.
2) Planning and risk assessment, including the importance of understanding audit risk and assessing risks of material misstatement.
3) Multiple topics are covered in detail, including internal control, audit evidence, and review and reporting.
The class emphasizes the relevance of standards like ISA 250 and ISA 315 for understanding audit objectives and risk assessment procedures. It also defines key terms like non-compliance and inherent risk.
For more course tutorials visit
www.newtonhelp.com
1.Developing an understanding of the client's business and industry is essential to proficiency as discussed in the general standards of GAAS. (Points: 4)
The document discusses several topics related to auditing:
1. It explains the importance of auditing financial statements and ensuring their reliability for management decision making and for investors. Auditing provides assurance that accounting statements are authentic.
2. It discusses the objectives of an independent audit are to obtain reasonable assurance that financial statements are free from material misstatement and to report findings.
3. It outlines specific inquiries an auditor makes of management to evaluate subsequent events that may affect financial statements, such as new commitments, sales, increases in debt or capital, asset losses, or accounting adjustments.
The audit found that the company had not performed an ABC analysis of suppliers to classify them based on spending amounts. This results in purchasing activities not focusing on key suppliers. It was also found that local purchases were only from one supplier and overseas purchases lacked competitive bidding. The audit recommends the company conduct an ABC analysis to identify key suppliers and invite competitive bids for large-value purchases.
CHAPTER 1 This list below indicated various audits, attestation,.docxzebadiahsummers
CHAPTER 1: This list below indicated various audits, attestation, and other engagements involving auditors.
1. A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.
2. An auditor’s report on whether the financial statements are fairly presented in accordance with International Financial Reporting Standards.
3. An engagement to help a company structure a merger transaction to minimize the taxes of the combined entities.
4. A report stating whether the company has complied with restrictive covenants related to officer compensation and payment of dividends contained in a bank loan agreement.
5. A report on the effectiveness of internal controls at a company that provides payroll processing for other companies.
6. An examination report stating whether a company’s statement of greenhouse gas emissions is presented in conformity with standards issued by the World Business Council for Sustainable Development and the World Resources Institute.
7. Evaluating the voting process and certifying the outcome for Rolling Stones Magazine’s “Greatest Singer of All Time” poll.
8. A report indicating whether a governmental entity has compiled with certain government regulations.
9. A review report that provides limited assurance about whether financial statements are fairly stated in accordance with U.S. GAAP.
10. A report about management’s assertion on the effectiveness of controls over the availability, reliability, integrity, and maintainability of its accounting information system.
11. An evaluation of the effectiveness of key measures used to assess an entity’s success in achieving specific targets linked to an entity’s strategic plan and vision.
Required
a. Explain the relationships among audit services, attestation services, and other assurance and no assurance services provided by CPA’s.
b. For each of the services listed above, indicate the type of service from the list that follows.
(1) An audit of historical financial statements.
(2) An attestation service other than an audit service.
(3) An assurance or no assurance service that is not an attestation service.
1-21. Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend James Foley asks, him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.”
a. Identify ways in which a financial statement audit adds value for clients.
b. List other services other than audits that Czarnecki and Hogan likely provides.
c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that .
The document discusses internal audit and review reports. It explains that internal auditors, external auditors, and consultants provide reports to management that provide evidence of work performed, conclusions reached, and recommendations made. The quality of these reports is important for adding value. Draft reports are often discussed with management and responses are incorporated. External auditor reports deal with issues relating to internal controls, weaknesses in systems, and recommendations. Internal audit engagements have a variety of objectives as part of corporate governance arrangements.
Advanced Auditing and assurance ,chapter1seidIbrahim2
The document provides an overview of auditing, including:
1. The origins and evolving definitions of auditing from verifying accounts to determining fairness in financial statements.
2. The increased demand for auditing due to factors like separation of ownership and control, regulatory requirements, and complexity of financial information.
3. The key differences between accounting, which prepares financial information, and auditing, which evaluates the reliability of that information and the processes that generated it.
The Auditor’s Responsibility To Consider Fraud And Error...Tina Jordan
Here is a draft essay about the case of Surfer Dude Duds, Inc:
Surfer Dude Duds, Inc. faced significant challenges due to mismanagement and lack of proper financial controls. As the company grew rapidly, the founders Joe and Bob failed to implement accounting systems and oversight to ensure the financial statements accurately reflected the business. This led to several issues.
First, without an inventory tracking system, it was impossible for Surfer Dude Duds to know the true value of its inventory or cost of goods sold. Relying on estimates and manual records left huge room for error. With thousands of items flowing through multiple retail locations, an accurate count was nearly impossible without technology support. This likely resulted in material
Similar to Audit & Assurance _MA-2023_Suggested_Answers.pdf (20)
1. The National Board of Revenue (NBR) is calling for applications from eligible candidates to participate in the VAT Officer (VO) recruitment exam-2017 in accordance with the VAT Act of 1984 and VAT Rules of 1984.
2. Candidates must have a bachelor's or master's degree in subjects like law, accounting, banking or finance from a recognized university in Bangladesh or abroad. Applications must be submitted online by March 31, 2017 along with required documents.
3. The written exam will have questions on tax laws, accounting and finance. It will carry 100 marks over 3 hours, and an oral exam carrying 50 marks will also be conducted. The exam date will be notified later via notice.
The document appears to be a scanned copy of a passport application form containing personal details such as name, date of birth, place of birth, nationality, etc. It includes sections for address, references, declaration, official use and a number of pages with the text "Scanned with CamScanner" at the bottom, indicating it was scanned from a hard copy document.
This document lists contact information for various chartered accountant firms in Bangladesh, including their addresses, contact numbers, emails, websites and names of proprietors or partners. Some firms have multiple branches located in Dhaka and Chattogram. The firms provide services like auditing, taxation, financial and management consultancy.
(1) The document discusses technical service fees charged for providing various technical services to foreign entities. It provides definitions and examples of different types of technical fees - professional service fees, technical service fees, technical know-how or technical assistance fees.
(2) Guidelines are given on calculating the rate for technical service fees, which is the number of foreign employees multiplied by a certain percentage of their salary. Registration of agreements related to technical service fees must be done according to the Registration Act.
(3) Examples are given of technical services that can be provided and the types of technical fees that can be charged for those services.
This document summarizes amendments made to several laws in Bangladesh related to banking and financial regulations. Key points:
- It amends definitions in the Bank Company Act 1991 related to terms like "banking company", "controlled entity", "family member", etc.
- It amends sections 7, 13, 14, 14K, 14L of the Bank Company Act 1991 related to custodial powers, restructured loans, limits on loan amounts to individuals/entities.
- It inserts new definitions for terms used in the amendments like "restructured loan", "shadow director", "financing activities", etc.
The document provides details of the specific sections amended and the new/amended definitions. In
The document summarizes key amendments made to the Patents and Designs Act, 1911 through the Patents and Designs (Amendment) Act, 2023. Some of the key changes include expanding the scope of patentable inventions, establishing patent offices and providing guidelines for granting patents. It also discusses procedures for filing and reviewing patents and establishing infringement and dispute resolution mechanisms.
This document establishes the formation of a new organization called the Digital Bangladesh Technology Park Authority (DBTPA) through an act of parliament. Some key points:
- DBTPA will be established as an autonomous government organization to support development of e-services, promote digital innovation, and help build an inclusive digital society.
- It will have the power to acquire and dispose of property, sue and be sued, and undertake any other necessary activities.
- DBTPA will be based in Dhaka but can establish branch offices elsewhere as needed with government approval.
- Its roles will include promoting tech innovation, research and development, awareness building, project implementation, advising government and others, and representing
1. The document is the additional issue of the Bangladesh Gazette dated October 17, 2023 published by the Government of Bangladesh containing official notices and advertisements.
2. It contains notices regarding registration of various documents under the Registration Act, 1908 as well as levy of stamp duty on certain instruments under the Stamp Act, 1899.
3. Details such as names of documents, registration fees to be paid, and stamp duty rates are provided in tabular format.
(1) The document discusses technical service fees charged for providing various technical services to foreign entities. It provides definitions and examples of different types of technical fees - professional service fees, technical service fees, technical know-how or technical assistance fees.
(2) Guidelines are given on calculating the rate for technical service fees, which is the number of foreign employees multiplied by a certain percentage of their salary. Registration of agreements related to technical service fees must be done according to the Registration Act.
(3) Examples are given of technical services that can be provided and the types of technical fees that can be charged for those services.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
A workshop hosted by the South African Journal of Science aimed at postgraduate students and early career researchers with little or no experience in writing and publishing journal articles.
Reimagining Your Library Space: How to Increase the Vibes in Your Library No ...Diana Rendina
Librarians are leading the way in creating future-ready citizens – now we need to update our spaces to match. In this session, attendees will get inspiration for transforming their library spaces. You’ll learn how to survey students and patrons, create a focus group, and use design thinking to brainstorm ideas for your space. We’ll discuss budget friendly ways to change your space as well as how to find funding. No matter where you’re at, you’ll find ideas for reimagining your space in this session.
How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
In this slide, we'll explore how to set up warehouses and locations in Odoo 17 Inventory. This will help us manage our stock effectively, track inventory levels, and streamline warehouse operations.
it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...PECB
Denis is a dynamic and results-driven Chief Information Officer (CIO) with a distinguished career spanning information systems analysis and technical project management. With a proven track record of spearheading the design and delivery of cutting-edge Information Management solutions, he has consistently elevated business operations, streamlined reporting functions, and maximized process efficiency.
Certified as an ISO/IEC 27001: Information Security Management Systems (ISMS) Lead Implementer, Data Protection Officer, and Cyber Risks Analyst, Denis brings a heightened focus on data security, privacy, and cyber resilience to every endeavor.
His expertise extends across a diverse spectrum of reporting, database, and web development applications, underpinned by an exceptional grasp of data storage and virtualization technologies. His proficiency in application testing, database administration, and data cleansing ensures seamless execution of complex projects.
What sets Denis apart is his comprehensive understanding of Business and Systems Analysis technologies, honed through involvement in all phases of the Software Development Lifecycle (SDLC). From meticulous requirements gathering to precise analysis, innovative design, rigorous development, thorough testing, and successful implementation, he has consistently delivered exceptional results.
Throughout his career, he has taken on multifaceted roles, from leading technical project management teams to owning solutions that drive operational excellence. His conscientious and proactive approach is unwavering, whether he is working independently or collaboratively within a team. His ability to connect with colleagues on a personal level underscores his commitment to fostering a harmonious and productive workplace environment.
Date: May 29, 2024
Tags: Information Security, ISO/IEC 27001, ISO/IEC 42001, Artificial Intelligence, GDPR
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Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptx
Audit & Assurance _MA-2023_Suggested_Answers.pdf
1. Page 1 of 16
AUDIT & ASSURANCE
Suggested Answers
March-April 2023
Answer to the Question# 1(a)
ISQM (both 1 and 2) which became effective from 15th
December 2022, applies to ABC & Co., Chartered
Accountants (‘the firm’ hereafter) as appropriate (as the firm provides audits of financial statements, assurance
and related services engagements. As the firm must meet the requirements of ISQM , it should have a system in
place which addresses each of the eight elements of ISQM-1 of which ‘ethical requirements’ is one.
(i) Relevant Ethical requirements for the firm
i. ISQM 1 requires a firm to establish policies and procedures to comply with relevant ethical requirements thus:
• Communicate its independence requirements to staff, and
• Identify and evaluate circumstances and relationships that create threats to independence, assessing
the impact of such threats and applying safeguards or withdrawing from the engagement if
appropriate.
ii. ISQM 1 requires a firm to maintain independence where required to do so by the following requirements:
• Staff to notify the firm of circumstances and relationships that might create a threat to independence;
• Staff to notify the firm of any breach
• The firm to communicate such breaches to the engagement partner and other relevant staff; and
• The engagement partner to advise the firm of action to be taken.
• If the firm is a member of network firm the principle of confidentiality may apply to the firm’s network, other
network firms or service providers, when they have access to client information obtained by the firm.
(ii) Resources
ISQM 1 requires the firm to ensure that:
i. It has sufficient personnel with the competence, capabilities and commitment to ethical principles to
meet its overall quality management objectives;
ii. For each engagement an appropriate and competent engagement partner, especially when a new
engagement partner has to take up audit of Oxygen Ltd. and team are assigned;
iii. Policies should therefore exist for the recruitment, training and development of staff. The firm should
ensure compliance with ISAs and audit staff should have a good knowledge of accounting standards
and local/national statutory accounting regulations;
iv. Given Oxygen Ltd. has introduced a new computerized system the firm should ensure that appropriate
technological resources are obtained or developed, implemented, maintained, and used, to enable the
performance of engagements such as would be required in case of Oxygen Ltd.
v. There should be procedures for ensuring that an audit team collectively has the appropriate level of
technical knowledge for the audit engagement and includes individuals with experience of audits of a
similar complexity, and an ability to apply professional judgment.
(iii) Monitoring and remediation process
This procedure should ensure that:
i. The firm is required to establish a monitoring process designed to provide it with reasonable assurance
that its quality management system is relevant, adequate and operating effectively. This process
should include inspecting, on a cyclical basis, at least one completed engagement for each engagement
partner;
ii. Responsibility for the monitoring process should be given to a partner or other appropriate person
with sufficient experience and authority. When monitoring reviews (also referred to as ‘cold reviews’)
are carried out they should not be performed by those involved with the engagement or the
engagement quality management review;
2. Page 2 of 16
iii. The firm should evaluate the effect of any deficiencies found to determine if they do indicate a failing
in the firm’s quality management system;
iv. The firm should communicate such deficiencies to relevant personnel, together with appropriate
remedial action such as:
• Action in relation to individual engagements or employees;
• Communication of findings to those responsible for training and professional development;
• Changes to the firm’s quality management system; and
• Disciplinary action, especially against repeat offenders.
v. If the results of monitoring procedures indicate that an inappropriate report may have been issued, or
procedures were omitted during the engagement, the firm should determine what further action is
needed. This might include obtaining legal advice;
vi. The firm should produce an annual report for partners setting out:
• The monitoring procedures performed;
• The conclusions drawn; and
• Any systematic deficiencies found and remedial action taken.
vii. The monitoring system should include procedures for dealing with complaints and allegations against
the firm. These should include establishing channels through which employees can come forward
without fear of reprisals.
Answer to the Question# 1(b) (i)
Policies and procedures for anti-money laundering programme
• T Hassan & Co should have established an anti-money laundering programme within the firm. As part
of this programme, the firm should have a money laundering reporting officer (MLRO) with an
appropriate level of experience and seniority.
• The audit firm should also have established internal reporting lines which should be followed to report
any suspicions. T Hassan & Co (the ‘firm’) will probably have a standard form which should be used
to report suspicions of money laundering to the MLRO.
• The typical content of an internal report on suspected money laundering may include the name of the
suspect, the amounts potentially involved, and the reasons for the suspicions with supporting evidence
if possible, and the whereabouts of the laundered cash. The firm's internal policies should have been
set up to ensure that all pertinent information is captured in this standardized report.
• Any individual in the firm who has suspicions of money laundering activities is then required to
disclose these suspicions to the MLRO. The report must be done as soon as possible as any non-
disclosure or failure to report such suspicions will constitute an offence under the money laundering
regulations.
• On receipt of the internal report, the MLRO must consider all the circumstances surrounding the
suspicions of money laundering activities, document this process and decide whether to report the
suspicions to the appropriate external authorities. The audit firm has a legal duty to report even though
this may conflict with the auditor's duty of confidentiality.
Answer to the Question# 1(b) (ii)
In the case of ABC Limited, the circumstances which may be indicative of money laundering activities include
the following:
Cash-intensive business
ABC Limited has a high level of cash-based sales (75%) and a high volume of individual sales reports. The nature
of its business therefore creates a significant risk that illicit cash funds are being passed off as legitimate sales.
More specifically Mr Chowdhury's sale to a business associate for Tk.33,000 may be an example of the
placement of illegal funds in order to legitimize them as genuine sales. The size of the transaction in a business
selling cleaning products and the round sum amount may be additional grounds for suspicion in relation to
this transaction.
3. Page 3 of 16
International property transactions
The performance of Mr Chowdhury's personal taxation computation has identified a significant number of
transactions involving the purchase and sale of properties in international locations. These transactions may
be examples of real estate laundering by Mr Chowdhury in his personal affairs. It is possible that he may be
purchasing these properties with illegal funds ('placement') and then selling them in order to make funds appear
legitimate ('integration').
A high volume of such transactions may also be indicative of the 'layering' of transactions in an attempt to
make the original source of the funds more difficult to trace.
Answer to the Question# 1(b) (iii)
Company tax computation
The performance of the company tax computation creates a self-review threat. As a result, there is a risk that
the auditor may not be sufficiently objective in performing the audit and may fail to identify any shortcomings
in their own work. In this case, therefore, a self-review threat to auditor independence arises because the tax
calculation forms the basis of the tax payable and the tax charge in the financial statements, and as such, the
audit team may be more likely to accept the tax calculations without adequate testing.
There is also a potential advocacy threat. An advocacy threat arises when the auditor is asked to promote or
represent their client in some way. In this situation, there may be a risk of the auditor being seen to promote
the interests of ABC Limited with a third party such as the tax authorities, and therefore that the auditor will
be biased in favor of the client and may not be fully objective.
While completing tax returns does not generally create a threat of management involvement by the auditor, as
completing the tax return may not involve the auditor making any judgements as long as management takes
responsibility for the returns, including any judgements which have been made, the threat to objectivity is not
likely to be significant.
Where tax calculations have been prepared by the auditor for the purpose of preparing accounting entries, the
Code of Ethics for Professional Accountants and the IFAC Ethical Standard state that this may be acceptable
for an unlisted audit client and that the firm should consider implementing safeguards in order to reduce the
self-review threat to an acceptable level. In this case, these safeguards might have included, for example, using
professionals who are not members of the audit team to prepare the tax computations. The tax services should
be reviewed by an independent tax partner, or other senior tax employee.
Given that ABC Limited is an unlisted client, T Hassan & Co should ascertain which members of staff performed
the taxation services and should review whether the threat to independence has been adequately assessed before
the taxation services were performed and whether adequate safeguards have been applied.
Mr Chowdhury’s personal tax computation
From an ethical perspective, there is no prohibition in the Code or the IFAC Ethical Standard on the
preparation of personal tax returns for the directors of an audit client such as ABC Limited. However, in this
case the auditor should consider whether the preparation of Mr Chowdhury's personal tax return may result in
the auditor being associated with criminal activities if the suspicions of money laundering activities noted
above prove to be well founded.
The auditor should also consider the appropriateness of personal taxation services being billed to the
company. Indeed, the preparation of Mr Chowdhury's personal tax return may be a taxable benefit which
should be included in his tax return and the fee for this service may need to be reflected in his director's loan
account with the company.
Website and online sales system
According to the Code of Professional Ethics, providing services to an audit client involving the design or
implementation of IT systems which form a significant part of the internal control over financial reporting or
generate information which is significant to the accounting records or financial statements on which the firm
will express an opinion constitutes a self-review threat.
In this case, the self-review threat arises as the new website and online systems will produce data which will
be used directly in the preparation of the ABC Limited’s financial statements. The audit process will therefore
include reviewing and testing of financial data and systems which T Hassan & Co has helped to design and
implement. As a result, there is a clear risk that the audit team may too readily place reliance on these systems.
4. Page 4 of 16
With reference to ABC Limited therefore, it is clear that providing assistance with the design and
implementation of the website and online sales system will constitute a self- review threat as the auditor will
audit assets and sales figures which are generated by the system.
There is also a risk that the firm may assume a management responsibility if they become involved in making
management decisions. In the case of revenue, this self- review threat may be heightened further by the auditor's
reliance on controls testing and on analytical review of the data summaries generated by the new system.
It also seems clear that the new online sales system will be significant to the client's financial statements and
records. Such a self-review threat may be too significant even for an unlisted client such as ABC Limited
unless appropriate safeguards are put in place.
Possible safeguards which might assist in managing the threats may include the following:
• The client should acknowledge its responsibility for establishing and monitoring the system of internal
controls and for the operating system and data it generates
• The respective responsibilities of the audit firm and the client should be clearly defined in a separate
engagement letter in order to ensure that the client makes all management decisions in relation to the
design and implementation process
• T Hassan & Co should use a separate team made up of non-audit staff to perform the systems design
and implementation assignment and the work performed by this team should be subject to independent
professional review.
If the self-review threat cannot be reduced to an acceptable level, or the engagement will result in the firm
assuming a management responsibility, the service should not be provided.
Answer to the Question# 1(c)
Identified Principal ethical issues are:
• Conflicts of interest
• Confidentiality
• East and West may perceive a threat in respect of disclosure/use of information
Procedures to address
• Procedures to ensure staff are aware of confidentiality issues and such issues have been brought to
attention of staff
• Staff to certify awareness of these procedures
• Obtain informed consent of clients
• Use of different partners and teams
• Independent review of arrangements for ensuring confidentiality maintained
Answer to the Question# 1(d)
The circular so indicated in the question defines the Public Interest Entity (PIE) as under:
(i) The entity that had last annual revenue to the extent of Tk.5 crore
To fulfill few other sub-sections, the same circular also covers other determinants as under:
(i) The total asset of the entity is amounting to Tk.3 crore
(ii) The total liabilities less owners’ equity amount to Tk.1 crore.
Answer to the Question# 2(a)
(a)Matters that should be considered in by Ahmed & Co. making acceptance decision Objectivity
The proposed assurance engagement represents a non-audit service. IESBA's International Code of Ethics for
Professional Accountants does not prohibit the provision of additional assurance services to an audit client.
However, the audit firm must carefully consider whether the provision of the additional service creates a threat
to objectivity and independence of the firm or members of the audit team.
For example, when the total fees generated by a client represent a large proportion of a firm's total fees, the
perceived dependence on the client for fee income creates a self-interest threat. Due to the nature of the
proposed engagement, self-review and advocacy threats may also be created, as the Sustainability Report is
published with the audited financial statements, and the audit firm could be perceived to be promoting the
interests of its client by providing an assurance report on the key performance indicators (KPIs).
5. Page 5 of 16
Ahmed & Co should only accept the invitation to provide the assurance engagement after careful consideration
of objectivity, and a review as to whether safeguards can reduce any threat to objectivity to an acceptable
level. As Federal Express Ltd. is a 'major client', the fee level from providing both the audit and the assurance
services could breach the permitted level of recurring fees allowed from one client. The fact that General
Express is listed means that the assessment of objectivity is particularly important and a second partner review
of the objectivity of the situation may be considered necessary.
Federal Express Ltd.'s requirements
Assurance engagements can vary in terms of the level of work that is expected, and the level of assurance that
is required. This will clearly impact on the scale of the assignment. For example, Federal Express Ltd. may
require specific procedures to be performed on certain KPIs to provide a high level of assurance, whereas a
lower level of assurance may be acceptable for other KPIs.
Newman & Co should also clarify the expected form tlnd content tlnd expected wording of the assurance
report itself, and whether any specific third party will be using the Sustainability Report for a particular
purpose, as this may create risk exposure for the firm.
Competence
The audit firm's specialist social and environmental assurance department has only been recently established,
and the firm may not have sufficient experienced staff to perform the assurance engagement. The fundamental
principle of professional competence and due care requires that members of an engagement team should
possess sufficient skill and knowledge to be able to perform the assignment, and be able to apply their skill
and knowledge appropriately in the circumstances of the engagement.
Some of Federal Express Ltd.'s KPIs appear quite specialised - verification of CO2 emissions for example,
may require specialist knowledge and expertise. Ahmed & Co could bring in experts to perform this work, if
necessary, but this would have cost implications and would reduce the recoverability of the assignment.
Scale of the engagement
The Sustainability Report contains 75 KPIs, and presumably a lot of written content in addition. All of these
KPIs will need to be verified, and the written content of the report reviewed for accuracy and consistency,
meaning that this is a relatively large engagement.
Ahmed & Co should consider whether the newly established sustainability reporting assurance team has
enough resources to perform the engagement within the required time scale, bearing in mind the time pressure
which is further discussed below.
Time pressure
Given that the financial statements are scheduled to be published in four weeks, it is doubtful whether the
assurance assignment could be completed, and a report issued, in time for it to be included in the annual report,
particularly given the global nature of the assignment.
Ahmed & Co may wish to clarify with Federal Express Ltd.'s management whether they intend to publish the
assurance report within the annual report, as they have done previously, or whether a separate report will be
issued at a later point in time, which would allow more time for the assurance engagement to be conducted.
Fee level and profitability
Such a potentially large-scale assignment should attract a large fee. Costs will have to be carefully managed
to ensure the profitability of the engagement, especially considering that overseas travel will be involved, as
presumably much of the field work will be performed at Federal Express Ltd.'s Sustainability Department in
Fartown.
The fee level would need to be negotiated bearing in mind the specialist nature of the work, and the urgency
of the assignment, both of which mean that a high fee could be commanded.
Global engagement
The firm's sustainability reporting team is situated in a different country to Federal Express Ltd.'s
Sustainability Department. Although this does not on its own mean that the assignment should not be taken
on, it makes the assignment logistically difficult.
Members of the assurance department must be willing to travel overseas to conduct at least some of their work,
as it would be difficult to perform the engagement without visiting the department responsible for providing
the KPIs. Other locations may also need to be visited. There are also cost implications of the travel, which will
need to be built into the proposed fee for the engagement. Language may also present a barrier to accepting
the engagement, depending on the language used in Fartown's location.
Risk
6. Page 6 of 16
Federal Express Ltd. is a large company with a global presence. It is listed on several stock exchanges, and so
it appears to have a high public profile. In addition, pressure groups are keen to see the added credibility of an
assurance report issued in relation to the KPIs disclosed. For all of these reasons, there will be scrutiny of the
Sustainability Report and the assurance report.
Ahmed & Co should bear in mind that this creates a risk exposure for the firm. If the assignment were taken,
the firm would have to carefully manage this risk exposure through thorough planning of the engagement and
applying strong quality measures.
The firm would also need to ensure that the fee is commensurate with the level of risk exposure. Given the
inconsistency that has come to light regarding one of the draft KPIs, which appears to overstate charitable
donations made by the company, we may need to consider that management are trying to show the company's
KPIs in a favourable way, which adds to the risk of the engagement.
Commercial consideration
If Ahmed & Co does not accept the assurance engagement, the firm risks losing the audit client in future years
to another firm that would be willing to provide both services. As Federal Express Ltd. is a prestigious client,
this commercial consideration will be important, but should not override any ethical considerations.
Answer to the Question# 2(b) (i)
In an ideal situation, once an engagement is accepted, the audit firm should carry on doing whatever is
necessary towards successful completion of the engagement. However, if it is sensed that successful
completion is unlikely and if at all done forming a credible opinion might not be possible due to potential
intimidating environment, the auditor may prefer withdrawing from the engagement. In that case following
steps may be necessary:
• Holding clear discussion amongst partners of the firm bringing on table all necessary points underlying
such hard decision
• If suitable, putting a note with the ICAB.
• Communicating the logic behind the decision of withdrawal with those charged with the governance.
While communicating, necessary reference of technical standards, ethical codes and other regulatory
directives may be offered for their clear understanding.
• If felt appropriate, taking a legal advice on the matter.
• Returning all evidence collected so far to the client, if left in original copy with the firm
• Last, but not the least, withdrawing regulatory notice (Form-23B) given to the Registrar of Joint Stock
Companies and Firms
Answer to the Question# 2(b) (ii)
IESBA Codes of Ethics offer appropriate ethical guidance to its members across the globe. Similarly, there
has been list of guidance applicable to a firm/professional accountant contemplating to accept a new
engagement. The guidance items are:
• Determine whether acceptance would create any threat to compliance with the fundamental principles.
• Determine potential threats to integrity and professional behavior due to the predominant influential
attitude of the owners, management etc.
• Review if the client has/had involvement in illegal activities.
• Evaluate the magnitude of the threats and apply suitable safeguard. If the threats are unlikely to be
eliminated or reduced to an acceptable level, it is better declining to enter the relationship.
• Periodically review acceptance decisions of recurring client engagements
• Accept only those engagements which professional accountant in practice is competent to perform.
• Evaluate the significance of the threats and apply suitable safeguard to eliminate them or reduce to an
acceptable level. Safeguards may include:
- Acquiring sufficient knowledge of the industries and related activities.
- Deploying adequate staff with due competencies
- Using expert services wherever necessary
• In case of replacing or tendering for an engagement currently held by a professional accountant in public
practice:
- Determine if there is any reason for not accepting this offer.
- Communicate directly to the existing accountant.
7. Page 7 of 16
- While communicating existing accountant the professional accountant in practice needs client’s
permission to do so.
Answer to the Question# 3(a) (i)
Going concern matters
Revenue and profitability
The extract financial statements show that revenue has fallen by 38.2%. Based on the information provided,
operating profit was Tk.1,150,000 in 2021 but is only Tk.340,000 in 2022. Operating margins have fallen from
29.1% to 13.9% during the year and the fall in revenue and margin has caused the company to become loss-
making this year.
These changes are highly significant and most likely due to the economic recession which will impact
particularly on the sale of luxury, non-essential products such as those sold by KINGS Ltd. The loss-making
position does not in itself mean that the company is not a going concern, however, the trend is extremely
worrying and if the company does not return to profit in the 2023 financial year, then this would be a major
concern. Few companies can sustain many consecutive loss-making periods.
Bank loan
The bank loan is significant, amounting to 33.7% of total assets this year end, and it has increased by Tk.500,000
during the year. The company appears to be supporting operations using long-term finance, which may be
strategically unsound. The loan is secured on the company's properties, so if the company defaults on the
payment due in June 2023, the bank has the right to seize the assets in order to recoup their funds. If this were
to happen, KINGS Ltd would be left without operational facilities and it is difficult to see how the company
could survive. There is also a risk that there is insufficient cash to meet interest payments due on the loan.
Trade payables
The trade payables balance has increased by 38.5%, probably due in part to the change in terms of trade with
its major supplier of raw materials. An extension to the payable payment period indicates that the company is
struggling to manage its operating cycle, with the cash being generated from sales being insufficient to meet
working capital requirements. Relations with suppliers could be damaged if KINGS Ltd cannot make
payments to them within agreed credit terms, with the result that suppliers could stop supplying the company
or withdraw credit which would severely damage the company's operations. There is also a risk that suppliers
could bring legal action against the company in an attempt to recover the amounts owed.
Borrowing facility
KINGS Ltd has Tk.500,000 available in an undrawn borrowing facility, which does provide a buffer as there
is a source of cash which is available, somewhat easing the going concern pressures which the company is
facing. However, the availability of the borrowing facility depends on certain covenants being maintained.
The calculations below show that the covenants have now been breached, so the bank is within its right to
withdraw the facility, leaving KINGS Ltd exposed to cash shortages and possibly unable to make payments
as they fall due.
Covenant 2022 2021
Interest cover 2 340/520 = 0.65 1,150/500 = 2.3
Borrowings to operating profit 4:1 3,500/340 = 10.3:1 3,000/1,150 = 2.6:1
Contingent liability
The letter of support offered to a supplier of raw materials exposes KINGS Ltd to a possible cash outflow of
Tk.120,000, the timing of which cannot be predicted. Given the company's precarious trading position and
lack of cash, satisfying the terms of the letter would result in the company utilising 80% of their current cash
reserve - providing such support seems unwise, though it may have been done for a strategic reason, i.e. to
secure the supply of a particular ingredient. If the financial support is called upon, it is not certain that KINGS
Ltd would have the means to make the cash available to its supplier, which may create going concern issues
for that company and would affect the supply of cane sugar to KINGS Ltd. There may also be legal
implications for KINGS Ltd if the cash could not be made available if or when requested by the supplier.
8. Page 8 of 16
Answer to the Question# 3(a) (ii)
Audit procedures in relation to going concern matters identified
• Obtain and review management accounts for the period after the reporting date and any interim financial
accounts which have been prepared. Perform analytical review to ascertain the trends in profitability and
cash flows since the year end.
• Review the minutes of the meetings of shareholders, those charged with governance and relevant
committees for reference to trading and financing difficulties. Additional focus should be given on the
letter of support and authorization of its issuance.
• Discuss with management the strategy which is being developed to halt the trend in declining sales and
evaluate the reasonableness of the strategy in light of the economic recession and auditor's knowledge of
the business.
• Review the company's current order book and assess the level of future turnover required to break-
even/make a profit.
• Analyse and discuss the cash flow, profit and other relevant forecasts with management and review
assumptions to ensure they are in line with management's strategy and auditor's knowledge of the business.
• Perform sensitivity analysis on the forecast financial information to evaluate the impact of changes in key
variables such as interest rates, predictions of sales patterns and the timing of cash receipts from customers.
• Calculate the average payment period for trade payables and consider whether any increase is due to lack
of cash or changes in the terms of trade.
• Obtain the contract in relation to the borrowing facility to confirm the covenant measures and to see if any
further covenants are included in the agreement.
• Review correspondence with the bank in relation to the loan and the borrowing facility to gauge the bank's
level of support for KINGS Ltd and for evidence of deteriorating relationships between the bank and the
company's management.
• Obtain the bank loan agreement to confirm the amount of the loan, the interest rate and repayment dates
and whether the charge over assets is specific or general in nature.
• Review the bank loan agreement for any clauses or covenants to determine whether there are any breaches.
• Obtain the letter of support in relation to the supplier to confirm the conditions under which KINGS Ltd
would become liable for payment of the Tk.120,000.
• Discuss with management the reason for the letter of support being given to the supplier to understand the
business rationale and its implications, including why the supplier approached KINGS Ltd for the letter
of support.
• Obtain any further documentation available in relation to the letter of support, for example, legal
documentation and correspondence with the supplier, to confirm the extent of KINGS Ltd's involvement
with the supplier and that no further amounts could become payable.
Answer to the Question# 3(b)
Areas of risk to consider by an auditor in the given scenario include:
a. Foreign exchange risk
The purchases from UK are charged to the Bangladeshi entity in pound sterling while the purchases
from China are charged to the Bangladeshi company in American dollars. There seems to be no
measures in place to manage the risk of foreign exchange conversion. The treatment of forex gains
or losses in the financial statements may result in material misstatements depending on the volume
of transactions;
b. Lack of segregation of activities
Activities are over-concentrated on the Chairman. All activities are either undertaken by the chairman
personally or solely approved by him;
9. Page 9 of 16
c. Financial statement risk (over/under statements)
Balances such as bank and accounts payable are likely to be misstated as substantial parts of the
company’s banking transactions and trade payables were routed through the Chairman’s personal
bank account rather than the company’s records. Proper bank reconciliation exercise cannot be
conducted under the circumstance;
d. Risk of overstatement of Bangladesh operating expenses
The costs during the period the chairman spent to oversee the UK company are all borne by the
Bangladeshi company. UK procurement expenses being channeled to the Bangladeshi company will
result in the overstatement of the Bangladeshi company expenses;
e. Risk of understatement of UK expenses
There is the risk of understatement of UK expenses especially as it relates to bank charges on foreign
procurements as those charges will mostly reflect in the Chairman’s personal account. The UK
expenses charged to the Bangladeshi company will understate UK expenses;
f. Risk of understatement of Bangladesh expenses
Expenses especially as it relates to bank charges on foreign procurements as those charges will mostly
reflect in the Chairman’s personal account rather than the company’s records;
Separate records of travel expenses of chairman were not kept.
g. Lack of adherence to entity concepts
The company is not being treated as an entity that is separate from its owner. Money being transferred to
the Chairman’s account for the UK company’s purchases, the Chinese purchases and the chairman’s
personal expenses could lead to overstatements of expenses.
h. Possible money laundering activities by the Chairman
Money is transferred to the Chairman’s account for the UK company’s purchases, the Chinese
purchases and the chairman’s personal expenses. These could lead to possible money laundering
activities;
i. Corporate governance risk
There is a risk that good corporate governance practices are not followed which may lead to the
failure of the organization. There is absolute power and authority vested in the Chairman. There is
no mention of the existence of Internal Audit function to vet or review the transactions undertaken
by the chairman;
j. Risk of understatement of UK company’s activities
Incomplete records of the UK company’s transactions will result in the understatement of the UK
company’s liabilities and purchases as procurements and accounts payable transactions are charged
to the Bangladeshi company;
k. Risk of misallocation of costs
There is wrong costing method resulting from the allocation of costs. This method favors the UK
company to the detriment of its Bangladeshi counterpart;
l. Exchange translation risk
Sub optimal results due to the arbitrary determination of costing method and estimates such as the
charging of the UK procurements to the Bangladeshi company at cost plus 25% while the purchases from
China are transferred to the Bangladeshi company at expected cost of landing plus 30%;
m. Incomplete recording
Audit risk arising from Incomplete and inaccurate recording of transactions and poor audit trail.
Sufficient appropriate audit evidence is lacking in this environment, which increases audit risk as the
auditors are likely to express inappropriate opinion due to the fact that the financial statements may
be materially misstated in either or both companies;
10. Page 10 of 16
n. Consolidation issues
The Bangladeshi audit firm that is putting together the financial statements would be relying on the
objectivity of the UK audit firm; and
o. Risk of different basis of measurement
Proper business valuation for the purpose of ascertaining net worth could be impaired due to the
different measurement scenarios in the conduct of business and measurement of the different units.
This portends a financial statement risk.
Answer to the Question# 4(a)
Potential audit risks and matters need to be discussed:
Audit risks Matters to discuss
Manufacturing company
• Inventories may be materially misstated due to
difficulties in estimating the degree of
completion of work in progress (WIP).
•
• The methods used by the company to
determine the stage of completion and
valuation of WIP.
Overseas customers
• Sales in foreign currencies may not be
translated at an appropriate rate, resulting in
revenue and receivables being misstated in the
financial statements.
• The rate used to translate transactions on
foreign currencies.
• The procedures adopted to ensure compliance
with accounting standards.
Bad debts
• There may be insufficient provision made for
bad debts as a result of increased difficulties in
assessing credit worthiness and recover ability
for overseas customers.
• The techniques used to assess credit worthiness
of customers, particularly those based
overseas.
• Method used to monitor and chase slow payers.
• Whether there are any known bad or doubtful
debts.
• The reasons for any seasonal variations within
the company's sales.
• The methods of managing cash flow and
working capital to address the impact of
seasonal variations.
Revenue growth
• Revenue may be overstated. The increased
volume of sales may increase the. extent of
errors arising within the accounting records.
• The reasons for the increase in revenue this
period.
• Whether any noticeable increase in error rates
within the accounting records has occurred.
Gross profit increase
• Gross profit may be overstated as a result of
items in transit to overseas customers being
included in both year-end inventories and
revenue purchases being understated.
• The reasons for the increase this period.
• Procedures used to ensure that transactions just
before or after the year end are recorded in the
correct accounting period.
• How adequate provision is made for purchases,
particularly those invoiced post year end.
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Operating profit increase
• Operating expenses may be understated due to
recording being incomplete and the client
failing to fully accrue for such expenses.
• The procedures for ensuring the completeness
of recording expenditure.
• The methods used for identifying and making
adequate provision for accruals
New computer system
• Modifications to the new computer software
may reduce its reliability. This, together with
the relative unfamiliarity of client staff with the
new system, will increase the risk of errors
arising.
• Misstatements may increase as a result of
information being lost or incorrectly
transferred from the old to new systems.
•
• The extent and nature of any problems being
experienced with the new system.
• The extent of training and system support
given to staff operating the new system.
• The criteria used to choose the new system and
the reason for the change.
• The procedures used to ensure that all
accounting information was correctly
transferred from old to new systems.
• The type of changeover which was used eg
parallel running, stepped changeover direct
changeover.
Bonus scheme
• The scheme provides an incentive for directors
to overstate income and understate
expenditure.
• The nature of any conditions attached to the
bonus.
• The effect on profits since the introduction of
the scheme.
• The anticipated level of bonus payable this
period.
Disclosure
• The audited accounts may fail to properly
disclose such bonuses within directors'
emoluments.
• Similarly, failure to properly include such
bonuses may result in current liabilities being
understated.
• The proposed treatment and disclosure of the
directors' bonuses within the financial
statements.
• Whether the directors are aware of the auditors'
legal duty to make good any disclosure lapses
in this area in the audit report.
Answer to the Question# 4(b) (i)
Notes for a planning meeting
Circumstances Why taken into account
• Multiple business locations. • Increases inherent risk (eg if the organisational
structure is loose and difficult to manage).
• Intense price competition. • May lead to uneconomic price discounting,
possibly threatening viability of business.
• In addition cash sales may rise due to presence
of mini markets leading to rise in the inherent
risk of material misstatements in the FS.
• Recent expansion of outlets into
minimarkets.
• Increases complexity of business and may lead
to loss of management control.
• Perishable nature and limited shelf-life of
food and drinks inventories.
• Increase risk of overstatement of inventory
values.
• Large volume of cash transactions. • Increases risk of incomplete income recording.
12. Page 12 of 16
• Nature of the business (garage
environment).
• Increases risk of loss of inventories and cash
due to theft or staff pilferage.
• May limit effectiveness of physical security
controls (eg over access to terminals).
• Recent introduction of sales of National
Lottery tickets.
• Increases inherent risk (eg the risk of loss to
midget Ltd if incorrect amounts are paid out on
winning tickets).
• Direct input via PC at branches. • Increases risk of misstatement, as batch
controls will not be feasible and scope for other
input controls may be limited.
• Small number of staff at each location (eg
one or two).
• Limits scope for segregation of duties within
branches and therefore increases control risk.
• Branch-based nature of business. • Limits effectiveness of management control
over activities of individual branches thereby
increasing control risk.
Answer to the Question# 4(b) (ii)
Effect of work of internal auditor on audit planning
(i) The internal auditor's identification and documentation of areas of weakness will give direction to
areas requiring increased substantive procedures.
(ii) Work of the internal auditor may assist in selection of branches for audit visits, (eg where control
failures have occurred).
(iii) The internal auditor may attend year end inventory counts at one or more branches, potentially
reducing the number of branches to be visited by us.
(iv) Work performed by the internal auditor may provide evidence to confirm operation of control
procedures, on which we may seek to rely to reduce the extent of our own procedures.
(v) Documentation of systems and controls by the internal auditor, including changes due to the
National Lottery, may reduce extent of our planning visits, as walkthrough checks may be
sufficient to confirm systems documentation.
Answer to the Question# 5(a) (i)
ISA 260 (revised) prescribes certain matters to be communicated to those charged with governance. Those
matters are described below:
The Auditor’s Responsibilities in Relation to the Financial Statement Audit
The auditor shall communicate with those charged with governance the responsibilities of the auditor in
relation to the financial statement audit, including that:
(a) The auditor is responsible for forming and expressing an opinion on the financial statements that have
been prepared by management with the oversight of those charged with governance; and
(b) The audit of the financial statements does not relieve management or those charged with governance
of their responsibilities.
Planned Scope and Timing of the Audit
The auditor shall communicate with those charged with governance an overview of the planned scope and
timing of the audit, which includes communicating about the significant risks identified by the auditor.
Significant Findings from the Audit
The auditor shall communicate with those charged with governance:
(a) The auditor’s views about significant qualitative aspects of the entity’s accounting practices, including
accounting policies, accounting estimates and financial statement disclosures. When applicable, the
auditor shall explain to those charged with governance why the auditor considers a significant
accounting practice, that is acceptable under the applicable financial reporting framework, not to be
most appropriate to the particular circumstances of the entity;
(b) Significant difficulties, if any, encountered during the audit;
13. Page 13 of 16
(c) Unless all of those charged with governance are involved in managing the entity: (i) Significant
matters arising during the audit that were discussed, or subject to correspondence, with management;
and (ii) Written representations the auditor is requesting;
(d) Circumstances that affect the form and content of the auditor’s report, if any; and
(e) Any other significant matters arising during the audit that, in the auditor’s professional judgment, are
relevant to the oversight of the financial reporting process.
Auditor Independence
In the case of listed entities, the auditor shall communicate with those charged with governance:
A statement that the engagement team and others in the firm as appropriate, the firm and, when applicable,
network firms have complied with relevant ethical requirements regarding independence; and
(i) All relationships and other matters between the firm, network firms, and the entity that, in the auditor’s
professional judgment, may reasonably be thought to bear on independence. This shall include total
fees charged during the period covered by the financial statements for audit and non-audit services
provided by the firm and network firms to the entity and components controlled by the entity. These
fees shall be allocated to categories that are appropriate to assist those charged with governance in
assessing the effect of services on the independence of the auditor; and
(ii) (ii) The related safeguards that have been applied to eliminate identified threats to independence or reduce
them to an acceptable level.
Answer to the Question# 5(a) (ii)
The communication processes as prescribed are briefly discussed below:
Establishing the Communication Process
The auditor shall communicate with those charged with governance the form, timing and expected general
content of communications.
Forms of Communication
The auditor shall communicate in writing with those charged with governance regarding significant findings
from the audit if, in the auditor’s professional judgment, oral communication would not be adequate. Written
communications need not include all matters that arose during the course of the audit.
The auditor shall communicate in writing with those charged with governance regarding auditor independence
when required.
Timing of Communications
The auditor shall communicate with those charged with governance on a timely basis.
Adequacy of the Communication Process
The auditor shall evaluate whether the two-way communication between the auditor and those charged with
governance has been adequate for the purpose of the audit. If it has not, the auditor shall evaluate the effect, if
any, on the auditor’s assessment of the risks of material misstatement and ability to obtain sufficient
appropriate audit evidence and shall take appropriate action.
Documentation
Where matters required by this ISA to be communicated are communicated orally, the auditor shall include them
in the audit documentation, and when and to whom they were communicated. Where matters have been
communicated in writing, the auditor shall retain a copy of the communication as part of the audit documentation.
Answer to the Question# 5(b)
The auditor must evaluate the effect of identified misstatements on the audit and evaluate the effect of
uncorrected misstatements, if any, on the financial statements.
• Identified misstatements. The auditor will need to consider revising the overall plan if:
- The misstatements identified indicate that other misstatements may exist, which when accumulated
could be material, or
- Accumulated misstatements approach the materiality level set for the audit.
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Where management has corrected misstatements detected, the auditor shall perform additional procedures
to determine whether misstatements remain.
• Communication and correction of misstatements:
- The auditor shall inform management of all misstatements and request that they be corrected.
- If management refuses, the auditor shall ascertain the reason and take this into account in the overall
evaluation.
• Examining the effect of uncorrected misstatements
- Reassess materiality
- Determine whether uncorrected misstatements are material, whether individually or in aggregate.
Materiality will depend on the nature of the misstatement and its impact on the financial statements. The
auditor is required to inform those charged with government and to request that corrections be made.
• Written representations:
The auditor shall request confirmation from management that the effect of uncorrected misstatements is
immaterial.
• Documentation-Audit documentation shall include:
- The amount below which misstatements are considered trivial.
- All misstatements accumulated.
- The auditor’s conclusion regarding materiality of uncorrected misstatements.
Certain circumstances may cause the auditor to deem misstatements material even if they are below the
materiality level. These circumstances include:
- Compliance with regulatory requirements
- Masking a change in trends or affecting ratios
- Increasing management compensation
- Affecting other information in documents included with the audited financial statements.
15. Page 15 of 16
Answer to the Question# 5(c)
As per IAS 37, a contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence
or non- occurrence of one or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required
to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
Unless the possibility of any outflow in settlement is remote, an entity shall disclose for each class of
contingent liability at the end of the reporting period a brief description of the nature of the contingent liability
and, where practicable:
(a) an estimate of its financial effect, measured under appropriate guidance provided in IAS 37;
(b) an indication of the uncertainties relating to the amount or timing of any outflow; and
(c) the possibility of any reimbursement
Answer to the Question# 6(a)
The procedures so required in the question above should include:
• Testing of journal entries to ensure they are appropriate. Particular attention might be necessary to the
year end entries;
• Review of accounting estimates to judge whether management bias has been applied;
• Scrutinizing significant and unusual transactions;
• Review of audit logs maintained in the critical computer systems, particularly to the GL system. Habit of
unusual use of such sensitive IDs might give rise to potential risk of modifying recorded numbers;
• Review of recent changes in the management structure as well as in the SoPs that unusually empower
senior officials to some additional work.
Answer to the Question# 6(b)
If the group engagement team plans to request a component auditor to perform work on the financial
information of a component, the group engagement team shall obtain an understanding of the following:
(i) Whether the component auditor understands and will comply with the ethical requirements that are
relevant to the group audit and, in particular, is independent;
(ii) The component auditor’s professional competence;
(iii) Whether the group engagement team will be able to be involved in the work of the component auditor to
the extent necessary to obtain sufficient appropriate audit evidence;
(iv) Whether the component auditor operates in a regulatory environment that actively oversees auditors.
Answer to the Question# 6(c)
Key audit matters are those matters that, in the auditor’s professional judgment, were of most significance in
the audit of the financial statements [of the current period]
The auditor shall determine, from the matters communicated with those charged with governance, those
matters that required significant auditor attention in performing the audit. In making this determination, the
auditor shall take into account the following:
(i) Areas of higher assessed risk of material misstatement, or significant risks identified in accordance with
ISA 315 (Revised).
(ii) Significant auditor judgments relating to areas in the financial statements that involved significant
management judgment, including accounting estimates that have been identified as having high
estimation uncertainty.
(iii) The effect on the audit of significant events or transactions that occurred during the period.
16. Page 16 of 16
The auditor shall determine which of the matters determined in accordance with respective conditions of ISA-
701 were of most significance in the audit of the financial statements of the current period and therefore are
the key audit matters.
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