- 20 Marks
Question
The idea to incorporate Peters & Shamsudeen Haulages Limited was mooted in London and it was incorporated on the return of Alhaji Shamsudeen to Nigeria. He met Peters during his stay in the UK. They had a good relationship which started in a coffee shop. As they met regularly in this shop, what to do on Alhaji Shamsudeen’s return to Nigeria became the subject of discussion. Based on their experiences, the idea of Peters & Shamsudeen Haulages Limited was birthed. Alhaji Shamsudeen subsequently returned to Nigeria, incorporated the company, obtained the appropriate expatriate quota, and Mr. Peters came in and started running the company.
On commencement, Sejumade Uzoma & Co was appointed the company’s external auditors. Whilst Mr. Peters was around, there was a good working relationship between the company and the audit firm.
After about nine years, Mr. Peters returned to the UK, leaving the company in the hands of Alhaji Shamsudeen. Subsequently, Sejumade Uzoma & Co started receiving complaints from Alhaji Shamsudeen and his key accounting staff. These complaints were rife even before the ninth month of the current year that Sejumade Uzoma & Co. decided not to continue with the engagement. The audit fee for the previous year had about thirty percent outstanding at this stage.
This was the position when Alhaji Shamsudeen approached your partner at Musa, Edewo & Co. (Chartered Accountants). Their discussion was fruitful for your firm, hence it was agreed by the partners that full professional procedures would be applied as normal. Part of the information available on interaction is that the year is almost ending, and there was uncertainty about the firm that will do the audit before the engagement of your firm. You have the responsibility of assisting your partner in ensuring that proper documentations would be done without any compromise.
Required:
a. According to professional requirements, discuss the issues your firm is expected to address in her correspondence with Sejumade Uzoma & Co. (10 Marks)
b. Evaluate the various circumstances that would lead to change in professional appointment. (5 Marks)
c. In consideration of the client, analyze the procedures necessary for proper client identification in accordance with anti-money laundering requirements. (5 Marks)
Answer
a. Issues to Address in Correspondence with Sejumade Uzoma & Co.
- Professional Etiquette:
- Ensure courtesy and professionalism in communication to uphold ethical standards.
- Request for Information:
- Request confirmation of whether there are professional or other reasons that the firm should consider before accepting the engagement.
- Outstanding Fees:
- Enquire about any outstanding audit fees as per professional ethics; unresolved fees may impair independence.
- Reasons for Termination:
- Understand the reasons behind the decision of Sejumade Uzoma & Co. to discontinue their services.
- Professional Clearance:
- Obtain necessary clearance to avoid conflicts or overlaps in the engagement process.
- Prior Engagement Details:
- Request copies of prior audit documentation that may assist in understanding the client’s financial and operational setup.
- Conflict of Interest:
- Address potential conflicts of interest or matters that may impede the independence of Musa, Edewo & Co.
- Regulatory Compliance:
- Ensure the firm adheres to ICAN professional standards and guidelines in all correspondence.
b. Circumstances Leading to a Change in Professional Appointment
- Disputes or Complaints:
- Unresolved disputes between the auditor and management, such as complaints or disagreements over fees or service quality.
- Audit Firm Independence:
- Situations where the auditor’s independence is impaired or perceived to be impaired.
- Financial Considerations:
- Non-payment of fees or disagreements over the financial terms of the engagement.
- Regulatory or Ethical Issues:
- Non-compliance with auditing standards or ethical lapses by the auditor or client.
- Operational or Management Changes:
- Significant changes in management, ownership, or the operational structure of the client.
c. Procedures for Client Identification under Anti-Money Laundering Requirements
- Verify Identity of the Client:
- Obtain and verify official documentation such as incorporation certificates, identity documents, and address proof for key individuals.
- Ownership and Control Structure:
- Identify ultimate beneficial owners and verify their identities.
- Nature of Business:
- Understand the business operations, source of funds, and key counterparties.
- Risk Assessment:
- Perform a risk assessment based on the client’s geographic location, industry, and transaction patterns.
- Screening Against Watchlists:
- Check the client and related parties against anti-money laundering watchlists and sanctions databases.
- Record Keeping:
- Maintain proper records of all identification and verification procedures for regulatory compliance.
- Ongoing Monitoring:
- Continuously monitor the client’s transactions and activities for suspicious patterns.
- Topic: Ethical Issues in Auditing
- Uploader: Kofi