ACC707 | Auditing | The Strengths And Weaknesses Of The Audit
a. Four chartered accounting firms have been taking part in a quality assurance working paper review program. Under this review each firm reviews the working papers of another firm and the reviewer discusses the strengths and weaknesses of the audit with the auditor from the other firm.
b. Johan Geldens, a chartered accountant ,also runs an insurance agency which complements his auditing ,tax and superannuation services .He doesn’t use his own name on anything relating to insurance agency and has a highly competent manager,Janine Borg, who runs it .Geldens often requests that Borg review the adequacy of the client’s insurance with management if the client seems underinsured.
c. Edith Bailey , a public accountant in a small country town,runs a small partnership accounting firm which provides tax services,management advisory services ,bookkeeping services and conducts audits for the same client .Since the firm has only two partners and there are only two accounting firms in this town frequentlythe same personcarries out these services over the last ten years .
Answer:
a. Four Chartered Accountant firms case
It has been clearly stated in the conceptual Framework requirements that there needs to be confidentiality present between the accountant and the client in relation to the fundamental principles. These principles also clearly state that the accountant is having no authority of discussing the information provided to him for the purpose of auditing to any outsider or third party without bring
ing this fact into the notice of the client (Cooper & Coram, 2015). The accountant can only convey the information provided to him if and only if it is needed for legal and professional duty or any such situation where the fundamental principles of the audit process are not hampered. For the particular case we are studying, it has been observed that a complete violation of the auditing principles have been made because all the files have been given to be reviewed to another member of the different organization. This act of the auditing from was completely illegal and irresistible because of which day should be penalized. Hence, it should always be kept in mind by the auditing firms that the information provided to them and not public documents and hence they should privatize the information while auditing the accounts of the company (Cooper & Coram, 2015).
b. Johan Geldens case
It was observed that the accountant was using the method of reviewing the customers about their insurance, in order to help the business to prosper in its field. The accountant is also said to provide the firm with a lot of information which can help them to guide the employees of the organization and further that information can be used to build the managerial framework and work according to it. For the company, we are analyzing it was observed that the clients were being exploited in order to improvise the business of the insurance company (Livne, 2015). Also, the basis of fundamental rules and objectivity of auditing and accounting principles were violated by the organization's accountant. It should also be made necessary for the accountant of the organization to evaluate all the documents so that the reason behind the uncertain profits that have been earned by the organization can be found out and strict actions can be taken if they are illegal. It has been clearly mentioned in section 340 of auditing act that no auditor is having the audacity to use the private information of an organisation for his personal use (Livne, 2015). If the auditor is in any way trying to exploit the private information of the organization he should be penalized heavily.
c. Edith Bailey case
According to the basic fundamental principles and the law, it’s clearly stated that the code of conduct should be maintained while assessment of the principles and the auditor and Accountant of an organization can never be the same person irrespective of the nature and volume of business carried out by the organization (Niemi & Sundgren, 2012). The biggest reason behind this principle is to remove any type of vulnerability that has been present in the accounts of the organization. It is a clear fact that no accountant will find any mistake in his own works because of which conflicts may arise within the organization. Hence, at the time of auditing if the auditor is different from the Accountant of the organization then the results of an unbiased decision and audit report can be achieved. It has been observed that the sections 290 and 291 contain a clear view of the influenced financial statement that can be created by an auditor because of the lack of independence of mind. These influenced financial statements will not only provide inaccurate information to the shareholders but will also harm the managerial framework of the organization. Hence, it is very important for an organization to let the auditor complete its work in an integrated and independent manner.
References
Cooper , B. and Coram, P. (2015) Modern Auditing & Assurance Services. 6th ed. Australia: Wiley.
Niemi, L & Sundgren, S. (2012) Are modified audit opinions related to the availability of credit? Evidence from Finnish SMEs. European Accounting Review. [online] 21(4), p. 767-796. Available from: https://doi.org/10.1080/09638180.2012.671465 [Accessed 17 September 2018]
Livne, G. (2015, May 12) Threats to Auditor Independence and Possible Remedies. Available from: https://www.financepractitioner.com/auditing-best-practice/threats-to-auditor-independence-and-possible-remedies?full[Accessed 17 September 2018]
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