Audit Issues

In: Business and Management

Submitted By michellesanto
Words 462
Pages 2
Audit Issues
1. Many large companies hire their law firm(s) to provide tax opinions that certain tax planning strategies have a reasonable of being sustained on an audit. Can the auditor rely on representation letters from third parties to avoid auditing these opinions? Briefly explain why or why not.
No, the auditor cannot rely on representation letters from law firms to avoid auditing these opinions. The auditor can only rely on the tax opinion of a specialist as defined in AU Section 326 Part 2.18, which defines a specialist as “a person (or firm) possessing special skill or knowledge in a particular field other than accounting or auditing." Therefore, in a situation when the auditor needs assistance with “special knowledge of matters about which the auditor does not have adequate technical training and proficiency.” However, this is not the case regarding tax planning strategies since the auditor is in fact knowledgeable concerning income tax matters that the legal counsel does not possess. The opinion of legal counsel on specific tax issues can be helpful to the auditor in forming their own opinion, but should not be relied on by the auditor.

2. Suppose an audit client refuses to allow you (the auditor’s senior manager) to see the tax accrual work papers. How does this action affect your audit opinion?
The auditor is required to obtain sufficient competent evidential matter through, among other things, inspection and inquiries to afford a reasonable basis for an opinion on the financial statements. If the client denies the auditor access to tax accrual work papers necessary, this will affect the auditor's ability to issue an unqualified opinion on the financial statements. The client should have these records and make them available to auditor, as stated in AU Section 326 Part 2.09 the “client is responsible for its tax accrual, the underlying…...

Similar Documents


...audit Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.[1] Internal auditing is a catalyst for improving an organization's effectiveness and efficiency by providing insight and recommendations based on analyses and assessments of data and business processes there are 3 types of Audit : 1. Internal audit ( first party audit),to ensure implementing, maintaining and improvement of the system audited. 2.Customer audit ( second party audit), to evaluate the suppliers performance and compliance for standards. 3.External audit (third party audit), to ensure implementing and documenting according to standards. Audit Process Prevalent Audit Concerns Risk Assessment Process Definition of Internal Audit The audit process is generally a ten-step procedure as outlined below. Please click through the steps in order to better understand the process. 1. Notification 2. Planning 3. Opening Meeting 4. Fieldwork 5. Communication 6. Report Drafting 7. Management Response 8. Closing Meeting 9. Report Distribution 10. Follow-up Notification First, you will receive a letter to inform you of an upcoming audit. The auditor will send you a......

Words: 768 - Pages: 4


...Audit Committee Material Weaknesses in Smaller Reporting Companies December 2nd, 2010 OUTLINE: I. SUMMARY OF THE ARTICLE II. PROBLEM STATEMENT III. SUGGESTIONS FROM THE AUTHORS IV. RELEVANCE TO AUDITING ENVIRONMENT V. CONCLUSION I. Summary of the Article This report summarizes the article published by Gramling, Audrey A, Hermanson, Dana R, Hermanson, Heather M in the CPA journal of 2009. The main focus of the article is to show the importance of audit committee in auditing and analyze problems of small companies face in developing effective audit committee. The critical issue of the article is material weaknesses related to audit committee and possibility of management’s override of internal control within small companies. Before, the Sarbanes-Oxley Act, audit committees in public companies were under more pressure to understand not just a company's financial statements, but to challenge management and auditors on key accounting, internal control and compliance issues. After the financial scandals that caused firms like Enron and WorldCom to collapse, audit committees have risen from relative darkness to center stage in modern corporate world. As it’s indicated in the article, the new role, the typical audit committee is charged with many duties. Because new role of audit committee increased complexity and accountability, it's easy for directors of small public companies to feel besieged when...

Words: 1917 - Pages: 8


...Audit Charter Authorized by: Date: Internal Audit Facilitator: Date: Audit Planning Identify and prepare internal auditors: | |Responsibilities |Preparation and Training | |Audit Team Leaders* |( Planning. organizing, and directing the audit |( Training in audit methods and practice | | |( Lead the team in reaching audit conclusions |( Audit observation | | |( Prevent and resolve conflicts |( Audit under supervision | | |( Prepare and complete the audit report |( Training and updates in customer, regulatory, | | | |and quality certification requirements | | | |( Training and updates in organization | | | |requirements | | | ...

Words: 654 - Pages: 3

Audit Procedure of Uhy Syful Shamsul Alam & Co. and a Comparative Analysis on Ifrs (Ias) and Aaoifi on Financial Reporting Issues

...An Internship Report On Audit Procedure of UHY Syful Shamsul Alam & Co. and A Comparative Analysis on IFRS (IAS) and AAOIFI on Financial Reporting Issues Department of Finance Faculty of Business Studies University of Dhaka An Internship Report On Audit Procedure of UHY Syful Shamsul Alam & Co. and A Comparative Analysis on IFRS (IAS) and AAOIFI on Financial Reporting Issues (As partial fulfillment of BBA Program) Submitted To Department of Finance University of Dhaka Supervised By Taher Jamil Lecturer Department of Finance University of Dhaka Submitted By Md. Rased Mosarraf ID: 16-062 Department of Finance University of Dhaka Date of Submission: May 22, 2014. Letter of Transmittal May 22, 2014. Taher Jamil Lecturer Department of Finance University of Dhaka Subject: Submission of internship report. Dear Sir, I have the pleasure to submit an Internship Report after completing a successful three month Internship attachment at a CA firm named “UHY Syful Shamsul Alam & Co.” on “Audit Procedure of UHY Syful Shamsul Alam& Co. and A Comparative Analysis on IFRS (IAS) and AAOIFI on Financial Reporting Issues”. I have concentrated my best effort to achieve the objectives of the report and hope that my endeavor will serve the purpose. The practical knowledge and experience gathered during report preparation will immeasurably help in my future professional life. I will be obliged if you kindly approved this......

Words: 13877 - Pages: 56


...University of Phoenix Material Audit and Business Structure Worksheet Write a response of no more than 150 words for each the following questions: |Compare a review and an audit. What are the differences? What are the similarities? | |The accounting information is the target of the audit. It is a measure to check internal control and financial reporting of the company. | |This entails a plan of action and systematic steps to consistently audit a business. The audit is an objective process of evaluating the | |statements the company makes about its economic condition. It also determines if the company followed the proper procedures in communicating| |the financial results to its users. | |In a review, the accountant receives limited assurance of no material modification made to financial statements. A review is generally | |completed for banks or potential purchasures that a mainly looking for comfort in the financial statement. | |Comparative Features: | |Review-Accountant has limited assurance | |Audit-Auditor obtains high level of assurance ...

Words: 587 - Pages: 3


...3-2 List the seven part of a standard unqualified audit report and explain the meaning of each part.How do the parts compare with those found in a qualified report? Seven part of a standard unqualified audit report: 1. Report title Auditing standards required that the report be titled and that the title include the word independent.The requirement that the title include the word independent is intended to convey to users that the audit was unbiased in all aspects. 2. Audit report address The report is usually addressed to the company,its stockholders , or the board of directors.In recent years,it has become customary to address the report to the board of directors and stockholders to indicate that the auditor is independent of the company. 3. Introductory paragraph The first paragraph of the report does three things.First,it makes the simple statement that the CA firm has done an audit.Second,it lists the financial statement that were audit.Third,the introductory paragraph states that the statements are responsibility of management and that the auditor’s responsibility of management and that the auditor’s responsibility is to express an opinion on the statements based on an audit. 4. Scope paragraph The scope paragraph is a factual statement about what the auditor did in the audit. 5. Opinion paragraph The final paragraph in the standard standard report states the auditor’s conclusion based on the results of the audit.The opinion paragraph is......

Words: 1474 - Pages: 6


...auditors should communicate so that the team maintains an independent state of mind at all times during the audit. The audit approach and tests/procedures are customized to the fraud assessment made. The audit team can incorporate random testing and sampling approach in the audit work which are difficult to anticipate by the client. Also the team understands where the focus will be as a result of the fraud assessment b. Theft of personal property from the business for the purposes of depriving the owner of its possession is a method of fraud referred to as lapping. Disagreed. Lapping refers to misappropriation of cash receipts. The theft is concealed by manipulation of A/R to cover the cash receipts. The cash received later is recorded toward the original A/R. The fraud is also covered by recording cash transfers to rare expenses or other accounts in G/L. c. A critical evaluation of evidence and professional skepticism are required for all financial statement audits, fraud examinations, and financial forensic examinations. Agreed. A critical evaluation of evidence is required to ensure that what has been stated is not misrepresented. Professional skepticism ensures that the auditor is alert and with a questionable mind to situations which indicate possible misstatements due to error or fraud. d. A client experienced a fire after the year end but before the audit report was issued, and had insufficient insurance to cover the loss of the building. This event......

Words: 2277 - Pages: 10


...interest in an audit client. Self review threat It occurs when the audit from a member or audit team put itself in a position of reviewing the subject that previously the member is responsible Familiarity threat It occurs when auditor has a close relationship with the client Advocacy threat It occurs when the audit from a member of the audit team promotes/support or may be perceived to promote an audit client’s position or opinion. Intimidation threat It occurs when a member of the audit team may be deterred from acting objectivity and exercising professional judgment due to pressure given by the audit client to terminate the service. Auditors have an obligation to disclose -where the courts order them to do so -where they suspect their client of offences of terrorism -they suspect the client to be a drug trafficker -under banking, insurance and financial services, they consider the client is either acting recklessly or is not fit & proper person to managing such business. Safeguards Family and other personal relationship Ensure personal relationship do not affect their objectivity Beneficial interests in shares and other investment Dosnt not hold share or ahs a beneficial in shares Loans Should not make or accept loans to or guarantee from audit client Provison of other service Not to perform mgmt. functions or to make mgmt. decision Oversue fees Auditor should collect all outstanding fee in full before providing a new audit......

Words: 6177 - Pages: 25


...Auditing HW #1 – Aug 26 1-36: a. Explain why management might want an independent audit of its financial statements. McIver’s management may want an independent audit of its financial statements for several reasons. First of all, due to the desired increasing growth, there is now a greater risk that salesmen and/or managers could report inflated numbers that align with management’s goals. An independent audit would be beneficial in discovering any such activity. Also, if McIver’s acquires the other swimwear distributorship there is an added risk. McIver’s probably does not have an in-depth knowledge of the other company, so an independent audit could also bring to light any malfeasance on the acquired company’s end. Finally, McIver’s could desire to go public in the near future considering its growth. Audits are necessary for public companies, and so it would make sense that management would want one. b. What are the factors that McIver’s might consider in deciding whether to seek an audit from a large national audit firm, a regional audit firm, or a local firm? McIver’s decision of whether to hire a national, regional, or local audit firm should be determined by various factors including quality, cost, familiarity with the industry, and familiarity with the region. Generally speaking, if McIver’s number one aspect of the audit was quality, they would choose a national firm. The downside of that would be the cost, which is generally higher. A local firm on the......

Words: 1732 - Pages: 7


...relationship between internal audit and corporate governance with various argumentations of internal audit activities, attempting to sketch out their relationship. It analyses the contribution of internal audit to corporate governance. Based on what I found in the journal and my opinion, this journal have emphasized the importance of internal audit which is really compulsory for every company to follow as it improves the efficiency and effectiveness of the management and company. Moreover it also have mentioned that the relationship and communication between employer and management is important in internal control which is an effective idea on maintaining employer’s loyalty and reduce fraud. But this journal less focus on the disadvantage of internal control if it is not handled wisely which is really need to be considered before implementing internal audit control system. The journal have explained well on how the internal control benefits the company but as an auditor or a manager, one should also consider the disadvantage that might be faced by the company from internal audit control.  Internal audit control systems have a few weaknesses that business owners must address. First, broad application. Internal audit control systems can be very broad in their application and this can create a weaker internal audit control system. Business owners should attempt to develop a system that focuses on specific business issues. Control systems that cover......

Words: 917 - Pages: 4


...ILLUSTRATIVE AUDIT ENGAGEMENT LETTER (Date) Name of Auditee Address Dear ________________ We are pleased to confirm our understanding of the services we are to provide you with under this engagement. Audit Scope. USAID’s applicable scope of work that was part of your RFP will be included or referenced to. Audit Objectives. The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles, the objective also includes reporting on: • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts and grant agreements, noncompliance with which could have a material effect on the financial statements, in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Our audit will be conducted in accordance with generally accepted auditing standards established by the Auditing Standards Board (United States); the standards for financial audits......

Words: 2547 - Pages: 11

Audit Issue and Assertion

...5-29 In planning the audit of a client’s inventory, an auditor identified the following issues that need audit attention. Listed is the issue and the assertion. Identify the assertion for items 1 through 11 above. 1. Inventories are properly stated at the lower of cost or market. Audit objective: Valuation and allocation. 2. Inventories included in the balance sheet are present in the warehouse on the balance sheet date. Audit objective: Rights and obligations 3. Inventory quantities include all products, materials, and supplies on hand. Audit objective: Classification and understandability and accuracy and valuation 4. Liens on the inventories are properly disclosed in notes to the financial statements. Audit objective: Classification and Understandability and rights and obligations 5. The client has legal title to the inventories. Audit objective: Rights and obligations 6. The financial statements disclose the amounts of raw materials, work in progress, and finished goods. Audit objective: Completeness. 7. Inventories include all items purchased by the company that are in transit at the balance sheet date and that have been shipped to customers on consignment. Audit objective: Rights and obligations 8. Inventories received on consignment from suppliers have been excluded from inventory. Audit objective: Rights and obligations 9. Quantities times prices have been properly extended on the inventory listing, the listing is properly totaled...

Words: 266 - Pages: 2


...JetBlue Audit Paper Name Institution Introduction JetBlue boasts to be a local low-cost airline in the United States having being incorporated back in 1998 with the delivery of services commencing in 2000. The incorporation of the airline occurred in Delaware in August, and many consider it a New York hometown carrier. Jet Blue had an approximately 32 million passengers in the year 2014 and the mean flights in a day were 825. Last year, the carrier number of passengers increased to 35 million with an average of 900 flights in a day. Moreover, it was the fifth largest carrier of travelers in 2015 with around 90 destinations in the USA. Considerably, JetBlue since the commencement of operations accomplished success in a duration of six years (JetBlue , 2016). Nevertheless, the company has various shortcomings in its procedures, and the evaluation of the corporation can provide more insights. JetBlue operating environment In the past years, the cost of fuel has continued to be low, and this has enabled JetBlue to have up surged revenues. The airline is also high with a considerable demand of customers as it has one of the best customer services. JetBlue management has over the years continued to monitor expenditures, and this has led to the success of the carrier. The revenue increment of JetBlue has tom some extent outperformed the airline industry by a mean of 6 %. JetBlue had a debt ratio of approximately 0.48 in 2015, which is at its lowest. Undeniably, this is......

Words: 2894 - Pages: 12


...Fraud Auditing and Different type of fraud Introduction Over the years, the role of auditors become increasingly important especially in a capitalist economy as the process of wealth creation and political stability depends heavily upon confidence in processes of accountability and how well the expected roles are being fulfilled. An auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing. The most frequently debated areas amongst auditors, politicians, media, regulators and the public is where the fraud is coming from and by whom. This disagreement has been especially tinted by the collapse of big corporations like Enron and WorldCom. The unforeseen fall of Enron and WorldCom traumatized the world as both of these companies received clean bills of health from their auditors immediately prior to their for bankruptcy. Type of fraud Fraud itself comprises a large variety of activities and includes bribery, political corruption, business and employee fraud, consumer theft; network hacking, bankruptcy and divorce fraud, and identity theft. Many find it helpful to separate between internal and external fraud. Internal fraud is usually found by internal auditors. In the Statement of Auditing Standards 99, it’s defines fraud as an intentional act that results in a material misstatement in financial statements. There are two types of fraud considered: misstatements......

Words: 2588 - Pages: 11


...RUNNING HEAD: Steps a business should take to guard against an audit. Steps a Business Should Take to Guard Against an Audit. Cheryl M Cassagne College Composition II CM225-15 Kaplan University Undergraduate School of Business and Management Professor Kelley Gordon July 6, 2010 July 6, 2010 To: Carmen Perez, Senior Financial Analyst From: Cheryl Cassagne, Operations Specialist CC Date: July 6, 2010 Subject: Steps a Business Should Take to Guard Against an Audit Enclosed is the report we have been discussing referring to audits. I am pleased to present to you the Steps a Business Should Take to Guard against an Audit report. This report contains information pertaining to the procedures that will prepare an organization for auditing and out of compliance materials. This report is analyzed according to three categories: (1) the accountability an audit can give a company, (2) having on demand documentation on premises, (3) internal auditing being cost efficient versus external audits. This report also explains how audits can damage the business’s reputation if not completed correctly. It is with anticipation that this report will provide the controllers and accountants with the necessary information needed to review the efficiency of the first year using internal auditors. Please feel me know if you have any questions about this report or if you need further information. I may be reached at 973-482-9396 and by email cc: Joe......

Words: 1308 - Pages: 6