Audit and Financial Reporting Assignment -
Question 1 - You are a partner in Messrs Rolando & Co, Certified Accountants. You are approached by Mr. Ismail, the managing director of Al Sharqiya Enterprises Ltd, who asks your firm to become the auditors of his company. In return for giving you this appointment Mr Ismail says that he will expect your firm to waive fifty percent of your normal fee for the first year's audit. The existing auditors, Messrs Hannood & Co. have not resigned but Mr. Ismail informs you that they will not be re-appointed in the future.
Required:
i. Critically evaluate the legal and ethical considerations for Al Sharqiya Enterprises Ltd. to remove its auditors Messers Hannood & Co. and appoint Messers Rolando & Co. in their place.
ii. Evaluate the legal options the two auditing firms can use to their benefit.
Question 2 - The examination of evidence is fundamental to the audit process. SAS 400 Audit evidence states that: "the auditors should obtain sufficient appropriate audit evidence to be able to draw reasonable conclusion on which to base the audit opinion". Evidence is available to the auditors from sources under their own control, from the management of the company and from third parties. Each of these sources presents the auditors with differing considerations as to the quality of the evidence to produce.
Required: With the help of examples critically evaluate the quality of the audit evidence coming from different sources. Also justify the general considerations which the auditors must bear in mind when evaluating audit evidence.
Question 3 - Ms. Juliet Roy is always very busy. She is the owner of a very successful fashion design business. One of their regular suppliers is Lamis Richards. Abeer is a trusted accountant of Ms. Juliet. It is Abeer's job to list the purchase invoices which need paying and to prepare the cheques for Ms Juliet's signature, which she does on a weekly basis. Juliet always makes sure that there is an invoice correctly listed for every cheque signed. However it is sometimes important for Abeer to pay an invoice quickly in order to receive exclusive materials which are often used for designing. For this reason Juliet always leaves a few signed blank cheques with Abeer.
Required: Put yourself in the role of internal audior of Ms. Juliet's firm and point out the possible consequences associated with the current system. Also suggest corrective measures.