What is False Assurance about Essay Sample
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What is False Assurance about Essay Sample
He is Alex Frayn Chief Financial Officer at D- Merton. He is responsible to manage D-Merton’s financial by supervising and resolving sufficient financial control structure. He has to ensure that the previous and present financial condition is correctly performed and recorded. He needs to decide where the company’s money should be invested and always consider the risk and liquidity. Majority of the decision is based on financial information. Therefore, he is liable to all the stakeholder of D-Merton and to be precise on the financial information.
Person B This enables the association to control the quality and consistency of execution. She is Litz Harris Audit & Risk Committee Chair. Her role is to look out for any mistakes made in the financial reporting and declare them. She is liable to all board members of the company.
Sarah Hancock. Audit Partner (for years ending 2011 and 2012)
She is responsible to sign and approve any the company’s audit report and financial reports for the clients. She is liable to all the clients and employees of the company who buy equity in the partnership she handled. “According to ISA 240 the Auditor’s responsibilities relating to Fraud in an Audit of Financial Statement when an auditor is conducting an audit.” CITATION PAK16 \l 1033 (PAKA, 2016) All the financial reports collected should be clear from material misstatements even if it caused by fraud or error. An auditor is responsible to gather reasonable assurance reports, identify and evaluate any risk due to fraud. The auditor will need to gather sufficient and appropriate evidence and react to any fraud or error suspected during the audit.
While acquiring reasonable assurance, the auditor must exercise in keep up a professional skepticism, reasonable care, and skill. The auditor needs to determine whether a fraud or error based on their experience, knowledge, and training. If there is any fraud or error, it should bring more attention to the auditors.
The first ethical threat that may affect the independence of TYSL Accountants’ audit is self-review. The complication of keeping up the objectivity in a situation where a judgment of a past audit record or non-audit, the audit needs to be re-assessed in achieving audit conclusion. Sam Keating had to re-assessed the work from the previous year to determine her judgment as she was afraid to discuss that the payment to Premintel was still going on to Joe. This actually affected her judgment and independent by giving an inaccurate information to the audit team. In order to reduce to an acceptable level, quality of control is needed to diminish the threat. The second ethical threat that may affect is self-interest. A financial interest will improperly affect the experienced accountant’s knowledge and judgment apart from the assurance team and their close family members. Richard has a close personal relationship with one of the assurance team member, Patrick. Sarah was given pressure from Patrick not to question Richard in regards to his relationship with his ex-brother-in-law. There was no evidence to prove that Richard has a connection with Premintal.
In order to reduce to an acceptable level, they can eliminate the member of the assurance team to ensure members of the audit committee do not make or conclude management decision for their client. Lastly, it will be familiarity threats may affect. This happens when an auditor tends to become over-influenced by the identities and characteristic of their client’s directors and senior managers and thus excessively thoughtful to their interest. Then again, an auditor may turn out to trust the management representations and hence, there will be inadequate accuracy in their audit testing. “According to Section 324D: Rotation of audit partners. Lead or review partner for five successive years cannot play a significant role in the audit of that entity for at least another two successive years.” CITATION Gay \l 1033 (Sinemet)Sarah had been the senior manager and she knows how the company function. However, she breached the independence requirements because she was aware of the relationship and did not take all the proper procedures during auditing.
In order to reduce to an acceptable level, rotation of the senior personnel and be responsible for the engagement quality control review.
One of the inherent risks of D-Merton is Related Parties. It is related to party transactions that did not show between two independent parties handling at arm’s length. So, the higher probability of misstatement from these transactions may remain and cause an increase in inherent risk. Sam Keating had discovered that Richard Dalton’s brother-in-law is one of the directors in Premintel. However, this was inaccurate as his brother-in-law had divorced Richard’s sister. So, it became Richard’s ex-brother-in-law. Nevertheless, Richard did not declare a family connection so it would be an honest concern.
The next inherent risk is a Non-routine transaction. Unusual transactions for clients will probably be mistakenly recorded than routine transactions because the client is lack of experience when recording it. The audit team discovered that the engagement with Premintel was supposed to end yet there were more frequent payments to them without any report stated on continuing the engagement. Sam Keating evaluated a high inherent risk in this situation.
One of the control risks was misstatement was not prevented during the audit. The TYSL accountants permitted the effects of the inherent risk to go through the financial reporting systems. The next control risk was that misstatement was not properly identified and amended.
Dan Sommer had no idea what he was looking for in the reports as Joe did not have enough time to discuss with him. He neglected his work by leaving those reports and rushed to meet his girlfriend as his girlfriend was calling for him. He failed to identify and amended the misstatement and allowed it to go through the financial system. The cancellation of an S1D system on will greatly affect its financial position as the company had spent heavily on cost and duration of this project. Due to the negligence of the audit team, they allowed inaccuracy while examining the financial system and influence the end of year audit plan. D-Merton had paid a large number of payments to their suppliers. In general, the audit team had overlooked to provide sufficient evidence during audit planning.
The cancellation of the products would be prompt to lose the enforced contracts with other organization that is expected the supplies from D-Merton. Majority of them chose to utilize their own so that the profit will decline in the future. Due to the unsuccessful of an S1D system, the cost of the company’s technology will reduce severely after the success of the three past systems and another strategy is needed to reestablish their assurance from their customers.
Yes. Sarah Hancock has practiced her duty of care as the audit partner. When dealing with any issue that was raised, she listens to team members and made the correct choice when obtaining from the officers of the company information. Clarification was done when needed for the objective of the audit.
However, she had breached her duty of care as the audit partner. She is required to decide and conclude with the Australian auditing standards and ethics before she accepts any assurance. Her team had encountered many ethnic threats and control risks.
During auditing, her work did not meet the responsibility of the audit partner because she was not independent and being vigilant of Patrick’s work.
CITATION PAK16 \l 1033 (PAKA, 2016)https://www.iaasb.org/projects/auditors-responsibility-consider-fraud-audit-financial-statements CITATION Gay \l 1033 (Sinmet)https://www.studocu.com/it/document/university-of-western-australia/auditing/slides-della-lezione/auditing-lecture-slides-3-12/372409/view?has_flashcards=1