Discuss the concept of professional skepticism and its importance in audit.
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Discuss the concept of professional skepticism and its importance in audit.
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Why is it sometimes difficult for auditors to exercise appropriate levels of professional skepticism in practice?
3.A company has been making losses on its operations due to many factors such as competition, impairment of some of its non-current assets and losses incurred on derivatives in its hedging activities as well as problems of complying with many laws and regulations governing its operations.
Required
As the audit manager in charge of the audit of this company, evaluate the areas in the audit of your client where the audit team members need to exercise a high level of professional skepticism.
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- A company has been making losses on its operations due to many factors such as competition, impairment of some of its non-current assets and losses incurred on derivatives in its hedging activities as well as problems of complying with many laws and regulations governing its operations. RequiredAs the audit manager in charge of the audit of this company, evaluate the areas in the audit of your client where the audit team members need to exercise a high level of professional skepticism.“The deliberate fraud committed by management that injures investors and creditors through materially misleading financial statements. The use of incentive systems and opportunities for fraudulent behavior are associated with higher fraud risk assessments by audit partners; however, the most important factors are senior management ethical attitudes and dishonest communication from management with the external auditor.” Required: Compare and contrast financial statement fraud with asset misappropriation. Why is it important to analyze the relationship between a company and its auditors?Question External auditors are very important gatekeepers. What was the cause of the breakdown in the relations of the company with its auditor? Do you think the auditors were correct in their point of view? Explain.
- (1) Audit Reports: (A) What types of companies are required to obtain an independent audit and what is the purpose of the Audit Report? (B) An “unqualified opinion” doesn’t sound very favorable; in fact, it sounds like the person giving the opinion does not have the proper credentials. Please clarify this issue. Wouldn’t a company rather receive a “qualified opinion?” Also, does a clean opinion mean the financial statements are 100% error-free? Please explain.The auditor prepares the financial statements for DecoPaints SAOG while also serving as the auditor for DecoPaints SAOG Company. By having the auditor review his or her own work, the auditor cannot be expected to form an unbiased opinion on the financial statements. Which threat may occur when a previous judgment needs to be re-evaluated by the professional accountant responsible for that judgment? Intimidation threats Advocacy threats Self-review threats Self-interest threatsAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case By having the auditor review his or her own work, the auditor cannot be expected to form an unbiased opinion on the financial statements. Which threat may occur when a previous judgment needs to be re-evaluated by the professional accountant responsible for that judgment? a. Self-review threats b. Advocacy threats c. Intimidation threats d. Self-interest threats
- Auditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case 32. Which threat may occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived? a. Self-review threats b. Advocacy threats c. Intimidation threats d. Self-interest threatsAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case Which threat may occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived? Intimidation threats Advocacy threats Self-review threats Self-interest threatsAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case Which threat may occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member? Self-interest threats Familiarity threats Self-review threats Advocacy threats
- Which sentence below is true about audit risk: A. Audit risk is the risk that a company may hire an incompetent auditor. B. Audit risk can be completely eliminated through appropriate sampling of transactions. C. Audit is what creates the demand for an audit. D. Audit risk is the risk that a "clean" opinion will be issued when, in reality, the financial statements are materially misstated..Which one of the following is other indicator or events or conditions that may cast significant doubt continue as a going concern? the entity's ability If the auditor found misstatements in financial statements resulting from fraud, the auditor encounters exceptional circumstances that bring into question his ability to continue performing the audit. the auditor shall : Ask the management for his withdrawal. Determine the professional and legal responsibilities applicable in the circumstances. Withdraw from the engagement immediately. Report to audit team regarding withdrawal. If the auditor identify and assess the risk of material misstatement due to fraud or error relating entity's related activities auditor shall: 1. Inquiry with management and others within the entity. Auditing ENTrue or False 1. The main source of the auditor's understanding about the status of cases and litigations faced by the entity is the entity's legal counsel 2. Control activities may be applied on either manual system, computerized system, or combination of both 3. Studying the relationship of financial information with another information, whether financial or non-financial, is an example of an analytical procedure 4. To reduce audit risk to an acceptable low level, the auditor should determine overall responses to assessed risks at the assertion level 5. It is necessary for the audit team members to have a collective knowledge needed to carry out the engagement 6. An important responsibility of an auditor is the establishment and maintenance of internal control on an ongoing basis 7. Generally, the more reliable internal controls are, the lesser the substantive test procedures the auditor would need to perform in auditing year-end account balances 8. The industry in which the client…
