a) You are the Audit Manager in the audit firm of Gidisu & Associates. One of your audit clients is Athletics Gh. LTD, a company specialising in the manufacture and supply of sporting equipment. Athletics Gh. LTD have been an audit client for seven years and you have been audit manager for the past three years while the audit partner has remained unchanged. You are now planning the audit for the year ending 31 December 2024. Following an initial meeting with the directors of Athletics Gh. LTD, you have obtained the following information:
i) Athletics Gh. LTD is attempting to obtain a listing on the Ghana Stock Exchange. The directors have established an audit committee, as required by corporate governance regulations, although no further action has been taken in this respect. Information on the listing is not yet public knowledge.
ii) You have been asked to continue to prepare the company’s financial statements as in previous years.
iii) As the company’s auditors, Athletics Gh. LTD would like you and the audit partner to attend an evening reception in a hotel, where Athletics Gh. LTD will present their listing arrangements to banks and existing major shareholders.
iv) Athletics Gh. LTD has indicated that the fee for taxation services rendered in the year to 31 December 2024 will be paid as soon as the tax authorities have agreed the company’s taxation liability. You have been advising Athletics Gh. LTD regarding the legality of certain items termed as ‘allowable’ for taxation purposes and the tax authority is disputing these items.
You have just inherited about 5% of Athletics Gh. LTD’s share capital following the death of a distant relative.
Required:
Identify and explain FIVE factors which may threaten the independence of Gidisu & Associates’ audit of Athletics Gh. LTD’s financial statements for the year ending 31 December 2024. Briefly explain how each threat should be managed.
b) You recently received your practising certificate and have joined Bintu and Associates as a partner. The firm has operated for decades with three partners: Mr. Bintu, Mr. Quashigah, and Mr. Kortey. All three partners have not undergone any form of training or continuous professional development since 2005. Additionally, you noticed that the firm has several clients, including Public Interest entities.
From your assessment of the staff skillset, you noticed the following:
- There is no Audit Manager. The last audit manager resigned two months ago, and he has not been replaced.
- The firm works with six Audit Seniors, none of whom are Chartered Accountants.
- The firm has four National Service Personnel working as audit trainees.
From your discussion with the Managing Partner, Mr Bintu, he insisted that there was no need to employ a new Audit Manager, and they have plans to temporarily promote two of the audit seniors to work as audit managers for a couple of months.
The firm was recently audited by the Quality Assurance Department of ICAG and scored an “E”. As a result, the partners have been invited to the ethics committee. Mr Bintu has asked you to review the firm’s audit manual and make changes to ensure compliance with the standards. He has also tasked you to train the partners and the other audit staff on ways to improve the Firm’s Risk Assessment Process.
Required:
i) Explain to the partners of Bintu & Associates the scope of the International Standard on Quality Management (ISQM) 1 and highlight the need to ensure compliance with the standard.
ii) Discuss the requirements of ISQM 1 about Bintu & Associates’ risk assessment process.
iii) Recommend TWO changes required at Bintu & Associates to ensure compliance with ISQM 1.
