"It is nothing to the auditor whether the business is run prudently or imprudently, profitable or unprofitably" _Do you agree? Give reason for your answer.
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- What are the differences between business failure, auditor failure, and audit risk? Is it fair to hold an auditing firm liable for any of these types of failures?Do you believe that the SEC should prohibit auditors from providing all nonaudit services for audit clients? Use ethical reasoning to support your answer.2. A client has departed from GAAP for what you, the auditor, considers to be justifiable. The financial statements would have been misleading if the client had not departed from GAAP. Circumstance: Type of Opinion:
- Which of the following statements is most likely to be included in an attorney letter?a. “Certain representations in this letter are described as being limited to matters that arematerial.”b. “If any unasserted claims or assessments are omitted from this disclosure, please provide this information directly to our auditors.”c. “Our work enabled us to notice some actions that could enhance the profitability of theCompany.”d. “Please furnish to our auditors such explanation, if any, that you consider necessary tosupplement the foregoing information.”Which of the following is an example of a self-interest threat to the fundamental principles? The fee quoted is so low that it may be difficult to perform the audit The auditor provides legal consultancy services to the company None of these Auditor prepared the accounts for the companyDo you think the concept of materiality is incompatible with ethical behavior? Consider in your answer how materiality judgments affect risk assessment in an audit of financial statements.
- Why does an auditor not have responsibility to identify or assess all business risks?Which of the following does NOT describe inherent risk? O tends to be driven by the nature of the business or account O risk a misstatement occurs irrespective of any controls determined by the effectiveness of internal controls O auditor cannot influence inherent riskSomething is deemed to be 'material' if its omission, non-disclosure or misstatement is likely to affect economic decisions or other evaluations made by users entitled to rely on the financial statements. Select one alternative: True False
- V2. If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments. the auditor should: disclose this fact in a footnote to the financial statements. seek to obtain the corroborating information from management. C) consider the refusal to be a scope limitation. D) honor the confidentiality of the client-lawyer relationship.Which of the following arguments supports the view that regulation is not necessary, particularly to the extent that it currently exists? Select one: a. Markets for information are not efficient and therefore produce a sub-optimum amount of information, given the problem of 'free riders'. b. Accounting information is like any other good, and people will be prepared to pay for it to the extent that it has a use. c. Investors need protection from fraudulent organisations that may produce misleading information. d. Information asymmetry exists because not everyone has the same power over resources to obtain the information they need.KPMG is the auditing firm for Tech Corporation, a listed computer software company. The audit team assigned to perform the audit includes an Audit Manager, a Senior Auditor and three Audit Assistants. No member of the team has updated their knowledge or experience on IT or the business processes of an IT company. Based on the given scenario answer the following question numbers 29, 30 and 31: What is the appropriate course of action in the given situation? O a. KPMG should file for bankruptcy and close their auditing firm O b. KPMG should place team members who has updated knowledge and skills in IT business processes O c. KPMG should file a complaint against Tech Corporation O d. KPMG should complete the audit engagement with the current audit team
