a.
Introduction:A contingency is an event occurrence of which is not certain, in terms of revenue recognition, a contingent sale should not be recognized without providing for a provision against non-fulfillment of conditions on which the sale was based.
To evaluate: The critical mistake ofMr. Pin review of Q1 of 1997 and its impact on willingness of auditor to take action in later period.
b.
To describe: The factors that motivated Mr. P to act as he did.
c.
Introduction:
Audit committee: It is a group consisting of board of directors of the company who are responsible to supervise the financial reporting process and audit function undertaken within the organization. This committee or group does the function of selecting the auditor and review the audit report to ensure adherence financial accountability.
To describe:The elements related to corporate governance which failed in the H’s situation.
d.
Introduction:
Confirmation letters: A confirmation letter is an audit tool that involves communication between the auditor and a party which is associated with the auditee, this is a form of external confirmation through which the auditor aims to confirm the balances presented by auditee by reaching out to the party against whose name the balance is presented by auditee.
To evaluate:Errors done by audit team in the confirmation process of year ending 1997.
e.
Introduction:
Accounting principles: These are the rules and guidelines that have to be followed by the companies at the time of financial reporting.
To describe:The course of action that Mr. P required to enable us to do the right things at the time of the acquisition process and alert the concerned parties regarding the default in accounting practices.
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Auditing: A Risk Based-Approach (MindTap Course List)
- You have recently been appointed as auditor to Johnson Plc; a company whose shares are traded on the Stock Exchange. The Directors of Johnson Plc have recommended that you perform the following services . (i) The statutory audit of the annual financial statements. (ii) Taxation services, and (iii) Consistency services in respect of the implementation of a new information technology system Your firm has not acted for Johnson Plc before but does act as auditor for one of the major competitors. Required. (a) Identify and explain the professional and ethical issues that should have been identified by your firm in relation to the provision of the services outlined above, and describe the safeguards that should be in place in order to address these issues. (Include citations to support work). (b) What are the fundamental principles of ethics? Briefly explain their meaning (Include citations to support work). (c) A client’s affairs should not be disclosed to third parties. However where a…arrow_forwardYou are a senior manager in the audit department of Raven & Co. You are reviewing three situations which have arisen in respect of audit clients, which were recently discussed at the monthly audit managers' meeting:Grouse Co is a significant audit client which develops software packages. Its managing director, Max Partridge, has contacted one of your firm's partners regarding a potential business opportunity. The proposal is that Grouse Co and Raven & Co could jointly develop accounting and tax calculation software, and that revenue from sales of the software would be equally split between the two firms. Max thinks that Raven & Co's audit clients would be a good customer base for the product. Plover Co is a private hospital which provides elective medical services, such as laser eye surgery to improve eyesight. The audit of its financial statements for the year ended 31 March 2012 is currently taking place. The audit senior overheard one of the surgeons who performs laser…arrow_forwardUse the three-step approach to analyse the following ethics-related issues using APES 110 and Corporations Act 2001. An audit senior, John Smith, is in the engagement team of ABC Bank, and he also has a mortgage account with the bank worth $500,000. John is paying an interest of 2.2% to the bank. The current market prevailing interest rate is between 1.9% and 2.3%.arrow_forward
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