The peculiarities of external audit that may make weaknesses undetectable:

i. Time is one of the most prominent limitations. Usually, both the auditors and the client agree to the timing of the audit. Due to some restrictions, however, the deadlines may not be met. Auditors may, therefore, need to reduce their audit review to meet the client’s expectations. In these cases, the quality of external audits may be compromised. Sometimes, the client may not provide the necessary information in the required time. Either way, these may result in time constraints, which is a limitation of external audits.

ii. There are threats that may exist to an auditor’s independence and objectivity. These include self-review, self-interest, intimidation, advocacy, and familiarity threats. If any of these threats exists for any auditor or the audit firm, the external audit may be discredited. Threats to independence and objectivity are inherent limitations of external audits.

iii. The use of professional judgment can be critical for any audit process, and the same applies to external audits. Auditors may need to use their professional judgment anywhere necessary to make decisions. For example, auditors must use their professional judgment to determine whether the internal controls procedures of the client are adequate. The inadequacy may pose a limitation to the audit assignment.

iv. Auditors need to use sampling in various areas where they cannot test the whole population. For example, it is prevalent in the test of controls and details. Auditors use sampling because of time and cost constraints. Most people expect auditors to test the whole population, which is not true. Instead, auditors only examine a specific number of transactions and balances to reach an opinion. This process also introduces sampling risk to an engagement.

v. The nature of external audits enables auditors to provide only reasonable assurance to clients based on their findings during the engagement. Some clients or users may think of this assurance as absolute whereas auditors do not assure users of the financial viability of the client or its management’s effectiveness.

vi. A lack of adequate understanding of the client’s business. External audit may not reveal all the inadequacies in a client’s environment if the external auditor does not fully understand the nature of the client’s business. This may make most of the weaknesses undetectable.

vii. Auditors rely on management for certain information and explanations in form of management representation If management is collusive or intentionally misleading, fraud can be well concealed.

viii. Audits provide reasonable assurance, not absolute assurance. Investigations are purpose-driven, detailed, and specifically designed to uncover fraud or mismanagement.

The factors the firm will have to consider before accepting the investigation assignment on Sleep Insurance Plc.

i. Financial stability: Evaluate the client’s financial stability and ability to pay for the services. This includes reviewing their financial statements, creditworthiness, and liquidity position. ii. Industry knowledge: Consider the firm’s familiarity with the client’s industry. Having prior experience in the industry can help the firm to understand the client’s operations, risks, and regulatory requirements.

iii. Independence: Ensure that the firm can maintain independence and objectivity while conducting the assignment. Evaluate any potential conflicts of interest, such as financial relationships or close personal ties with the client.

iv. Expertise and resources: Assess the firm’s expertise and resources to handle the client’s specific needs. Consider factors such as the size of the investigating team, their experience with similar clients, and the availability of specialised skills.

v. Time and resources: Evaluate the firm’s capacity to complete the assignment within the required timeframe. Consider factors such as the availability of staff, workload, and any potential conflicts with other engagements.

vi. Legal and regulatory requirements: Ensure compliance with legal and regulatory requirements. Assess any potential risks associated with the client’s operations, such as legal or regulatory violations, pending litigation, or complex transactions.

vii. Professional competence: Ensure the firm has forensic accounting and investigative expertise to handle the scope of work.

viii. Clarity of terms of reference: The scope and objectives of the investigation must be clearly defined, for instance, in this circumstances to state what will be investigated, such as fraud, related party transactions, management misconduct, etc.

ix. Access to records and people: Confirm that investigators will have unrestricted access to company records, systems, and personnel.

x. Stakeholders‟ expectations: Align the objectives of the investigation with shareholders‟ expectations to prevent disputes later.

xi. Risk assessment: Assess reputational and litigation risks involved in accepting the assignment.

The form and contents of an investigation report to be provided by the firm are given as follows:

i. addresse (client);

ii. caveat/limitation of the investigators;

iii. executive summary: A concise overview of the investigation’s purpose, scope, and key findings;

iv. case details: Identifiers, referral source, key dates, and a brief summary of the case;

v. incident description: A detailed account of the event being investigated; respective responsibilities of the investigator and addressee (client);

vi. subject information: Relevant details about individuals or entities involved; vii. description of the work performed;

viii. evidence: A comprehensive log of evidence collected and analysed;

ix. interviews: Summaries of interviews conducted, including notes, transcripts, and witness statements; and

x. findings: A detailed analysis of the evidence and its implications.

xi. recommendations: Specific actions or changes proposed based on the findings;

xii. conclusion: A summary of the investigation’s results and the rationale for the recommendations;

xiii. appendices: Supporting documents like photos, surveillance reports, or expert opinions; and

xiv. disclaimer: Clarification that the report is not an audit opinion, and is based on available evidence.