Corporate Governance – Page 5

AA – L2 – Q7 – The Role and Responsibilities of Auditors

Highlight directors' responsibilities for financial statements at Apex Ventures. Describe professional scepticism and explain its importance in auditing Apex Ventures.

Question

(a) Briefly highlight the directors’ responsibilities relating to the financial statements at Apex Ventures.

(b) During the audit team planning meeting for Apex Ventures, a member of the audit team passed a comment that, based on past experience with the client, he was confident that the management of the client was honest and there was no issue as regards management integrity or risk of fraud in the company. The audit manager responded that the auditor should always maintain an attitude of professional scepticism throughout the audit.

Briefly describe ‘professional scepticism’ and elaborate on the response of the audit manager.

Answer

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Tags: Audit Planning, Corporate Governance, Directors Responsibilities, Fraud RiskFinancial Statements, Management Integrity, Professional Scepticism
Level: Level 2

Topic: The Role and Responsibilities of Auditors

AAA – L3 – Q5 – Corporate Governance

Identify corporate governance issues at BEM plc and recommend changes to align with good governance principles.

Question

Memo
From: A N Accountant
To: Wickman & Co
Date: November 20X8
Subject: Corporate Governance in BEM plc

As requested, I write to explain where your client BEM plc (BEM) does not appear to be following appropriate corporate governance codes and to recommend changes to ensure that the principles of good corporate governance are being followed.

Answer

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Tags: Audit committee, Board structure, Corporate Governance, Internal controls, Non-executive directors
Level: Level 3

Topic: Regulatory environment

AA – L2 – Q5 – Fraud and Error

Explain how internal audit helps manage fraud and error risks in an entity.

Question

(a) Explain how the internal audit function helps an entity with the risk of fraud and error.

(b) Explain the responsibilities of external auditors in respect of the risk of fraud and error in an audit of financial statements.

(c) SunCity Travel is an independent travel agency. It does not operate holidays itself. It takes commission on holidays sold to customers through its chain of high street shops. Staff are partly paid on a commission basis. Well established tour operators run the holidays that SunCity Travel sells. The networked reservations system through which holidays are booked and the computerised accounting system are both well-established systems used by many independent travel agencies.

Payments by customers, including deposits, are accepted in cash and by debit and credit card. SunCity Travel is legally required to pay an amount of money (based on its total revenue for the year) into a central fund maintained to compensate customers if the agency should cease operations.
Describe the nature of the risks to which SunCity Travel is subject arising from fraud and error.

Answer

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Tags: Corporate Governance, Error Risk, Fraud Risk, Internal Audit
Level: Level 2

Topic: Fraud and Error

Tag (SQ): Corporate Governance

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AA – L2 – Q7 – The Role and Responsibilities of Auditors

Highlight directors' responsibilities for financial statements at Apex Ventures. Describe professional scepticism and explain its importance in auditing Apex Ventures.

AAA – L3 – Q5 – Corporate Governance

Identify corporate governance issues at BEM plc and recommend changes to align with good governance principles.

AA – L2 – Q5 – Fraud and Error

Explain how internal audit helps manage fraud and error risks in an entity.

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Tag (SQ): Corporate Governance

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AA – L2 – Q7 – The Role and Responsibilities of Auditors

Highlight directors' responsibilities for financial statements at Apex Ventures. Describe professional scepticism and explain its importance in auditing Apex Ventures.

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AAA – L3 – Q5 – Corporate Governance

Identify corporate governance issues at BEM plc and recommend changes to align with good governance principles.

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AA – L2 – Q5 – Fraud and Error

Explain how internal audit helps manage fraud and error risks in an entity.

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