Auditor Responsibilities

AA – L2 – Q17 – Fraud and Error

Respond to directors about undetected petty cash theft and audit report reissuance. Explain why auditors consider compliance with laws and regulations and actions for material non-compliance.

Question

The directors of your client, Solace Medical Research Labs, have telephoned to tell you that one of their junior employees has been caught stealing petty cash and has admitted to several previous thefts. The total amount of lost cash has been estimated by the directors to be $300. The thefts took place in the year in respect of which you have just completed the audit. The materiality level on the audit was set at $100,000.

The directors are demanding to know why this was not picked up during the audit work, and when the auditor’s report will be reissued as the auditor’s report and financial statements have now been signed.

Required:

(a) Set out the points you would include in a response to the directors of Solace Medical Research Labs.

(b) Explain why the auditor, when planning and performing his audit, should consider whether his client has complied with law and regulations. Set out the actions which may be appropriate if the auditor identifies material instances of noncompliance (NOCLAR).

Answer

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Tags: Audit Report, Auditor Responsibilities, Financial Statements, Fraud Detection, Materiality
Level: Level 2

Topic: Fraud and Error

AA – L2 – Q6 – Audit Engagement

Explain objectives of agreeing audit terms per ISA 210 and list main components of an engagement letter.

Question

Engagement letters

Required

(a) Explain the objectives of the auditor in agreeing the terms of an audit engagement for Zenith Enterprises.

(b) Set out the main components of an engagement letter for Zenith Enterprises.

Answer

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Tags: Audit Scope, Auditor Responsibilities, Engagement Letter, Financial Reporting Framework, Management Responsibilities
Level: Level 2

Topic: Regulatory Framework for Auditing

AA – L2 – Q2 – The Role and Responsibilities of Auditors

Explain the purpose and role of external audit in large companies for training materials.

Question

The purpose of an external audit and its role are not well understood. You have been asked to write some material for inclusion of your firm’s training materials dealing with these issues in the audit of large companies.

Required:

(a) Draft an explanation dealing with the purpose of an external audit and its role in the audit of large companies, for the inclusion in your firm’s training materials.

(b) The external audit process for the audit of large entities generally involves two or more recognizable stages. One stage involves understanding the business and risk assessment, determining the response to assessed risk, testing of controls as the interim audit. Another stage involves further tests of controls and substantive procedures and audit finalisation procedures. This stage is sometimes known as the final audit.

Describe and explain the main audit procedures and processes that take place during the interim and final audit of a large entity.

Answer

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Tags: Auditor Responsibilities, External Audit, Financial Statements, Public Interest, Stewardship
Level: Level 2

Topic: The Role and Responsibilities of Auditors

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AA – L2 – Q17 – Fraud and Error

Respond to directors about undetected petty cash theft and audit report reissuance. Explain why auditors consider compliance with laws and regulations and actions for material non-compliance.

AA – L2 – Q6 – Audit Engagement

Explain objectives of agreeing audit terms per ISA 210 and list main components of an engagement letter.

AA – L2 – Q2 – The Role and Responsibilities of Auditors

Explain the purpose and role of external audit in large companies for training materials.

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AA – L2 – Q17 – Fraud and Error

Respond to directors about undetected petty cash theft and audit report reissuance. Explain why auditors consider compliance with laws and regulations and actions for material non-compliance.

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AA – L2 – Q6 – Audit Engagement

Explain objectives of agreeing audit terms per ISA 210 and list main components of an engagement letter.

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AA – L2 – Q2 – The Role and Responsibilities of Auditors

Explain the purpose and role of external audit in large companies for training materials.

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