Contents
Answer to Question for Week 1
Answer to Question for Week 2
Answer to Question for Week 3
Answer to Question for Week 4
Answer to Question for Week 5
Reference
Answer to Question for Week 1
There are two types are assurance engagement - One is Reasonable Assurance Engagement and the second is Limited Assurance Engagement. Under reasonable assurance engagement, the practitioner can gather sufficient and appropriate evidence to provide positive assurance on the books of accounts of the company. And on the other hand, under limited assurance engagement, the practitioner could not gather sufficient and appropriate evidence to form a conclusive assurance on the books of accounts of the company. So the practitioner will provide the report in the form of negative assurance.
In the given scenario, local has not maintained its books of accounts, since it is a small scale proprietor company. But on the other hand, OEL which is going to take over local wants an assurance over the financial statement of books of Local.
The task which will be performed will be Limited level assurance engagement. Since the practitioner has access to books of accounts OEL, they will be able to gather a sufficient amount of evidence to form an opinion on the books of accounts of the company. This means that the quantity and quality of evidence gathered would be lower as compared to those in a reasonable assurance engagement since the objective here is not to cover all material respects of the financial statements. But then he will provide his report in negative form. In this case, the practitioner will state like 'nothing has come to the attention that causes us to believe that the financial statements are not prepared following applicable legislation and accounting standards'.
Answer to Question for Week 2
An auditor can be held responsible only when the third party has proved the following facts:
In the given case, Data went into heavy loss after august 2018. Wherein I have conducted an audit for the financial year ending 30th June 2018. So I can rightfully argue that my audit report holds good up to the period of 30th June 2018. And that the opinions expressed in the report are for the FY 2017-18. For additional points I will be providing them:
Answer to Question for Week 3
3. (a) Below are the key threats to Hall & Associates’ independence -
3.(b) For all the threats mentioned above, Hall and Associates should make sure, it follows the professional guidelines and conducts mentioned. They should not agree for CGL shares in place of remuneration for the audit conducted. Agreeing for such remuneration will result in a breach of the audit engagement. Also, it should make sure, CGL's actual current ratio is reflected in the audit report.
Answer to Question for Week 4
4. (i) In this scenario, there is an Inherent audit risk type involved. These are the risks that will arise due to factors excluding the control risk factors. They are usually considered to be of high value, hence they will have a huge impact on the financial statements of the company. Since the financial controller claims, that newly appointed treasurer has realized profit in yen, there is a chance of complex derivative calculation involved. Also, it should be noted that there is high human judgment involved. The financial controller is assuming that the treasurer will be realizing more profit in the long run.
(ii) In this case, there is an inherent audit risk involved. Even though the financial controller is confident in determining the accurate closing values, still there are elements of risk that are caused by factors that are out of human control. For eg, political problems, climate change, PESTLE, etc.
(iii) This scenario as well consists of inherent risk. The financial controller is planning to introduce a bonus system to increase the sales volume, but without achieving the actual target he is going to announce the bonus scheme to his employees. There is an immense level of human (financial controller's) assumption involved in this.
(iv) By installing new accounting software, there will be an element of control risk involved. These risks arise due to the lack of an internal control system of the company. If the internal control system is weak, then there are increased chances of errors or fraud in the books of accounts. Is should be ensured that work performed by one person is verified by another person.
(v) Control risk is involved in this scenario, when the company is giving all the access to data, including the rights to modify, then it means the internal control system is absent in the company. The accountant who is having access to data backup or data modification might misuse his freedom. The company should ensure that proper authorization should be given for the accountant to modify the data.
Answer to Question for Week 5
Anderson, U.L., Head, M.J., Ramamoorthy, S., Riddle, C., Salamasick, M. and Sobel, P.J., 2017. Internal auditing: Assurance & advisory services. Institute of Internal Auditors Research Foundation.
Knechel, W.R., and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Kumor, I. and Mackowiak, E., 2018, June. Materiality in Accounting and Auditing. In Economic and Social Development (Book of Proceedings), 32nd International Scientific Conference on Economic and Social (p. 218).
Mishra, A.M., 2020. Auditors and Auditing.
Ozturk, M.S., 2019. Emerging Auditing Perspectives in the Age of the Fourth Industrial Revolution. In Organizational Auditing and Assurance in the Digital Age (pp. 172-187). IGI Global.
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