F8 - Who audit the bullys?

[Acid]

Hi

(Reference:GTG Studytext page C1.5 section 2 example.)


From this example and previous other text It seems that no auditor is willing or allowed to audit organizations which have a bad previous reputation or were previoulsy invovled in fraud/criminal activities.

In the example Anna was fearing to take the audit assignment bcoz that may make her involved with immoral and possibly illegal activies and thereby embrassing her profession ... So arent they supposed to audit these organizations ?

This seems to me like , for example . There are 2 Lanes . Lane 1 and Lane 2

In Lane 2 there is a fight going on and while Lane 1 is peaceful.

When the police is called , and he sees that the lane 2 is busy with criminal fighting he decides to enter the Lane 1 and sit there saying "Everything is fine and peaceful and I wont go to Lane 2 as this would bring disreput to my profession" :D


Please clarify this point.

Thanks

Acid

[Sao]

Hi,

Can you tell me where i can find about lowballing andaudit fee negotition in th GTG studytext?



Saood~

[Vanessa]

Answer to Acid's question:

Re:Reference:GTG Studytext page C1.5 section 2 example.)


Risks to audit can be mitigated by applying required safeguards. In the example about Anna, refused the audit since "the risks faced by her (as perceived by her) were immoral and illegal activities and thereby embarrassing her profession".

It is possible that any other auditor may accept the audit after applying safeguards to mitigate / reduce the risk to an acceptable level.
The safeguards which could be applied are:
(i) Discuss the issues in detail with the audit committee.
(ii) Relating to the company operating sweat shops: The auditor can inform the management and the audit committee about the repercussions of their activities on the reputation of the company in the long run. This can be communicated through the internal report to the management.
(iii) Relating to cash operations: The auditor can accept the audit and carry out extensive audit procedures in the area of cash operation and find out if there are is any money laundering and report the matter in the audit report.

Considering the above, it is possible that Anna is not having enough staff strength to conduct detailed audit procedure in the area of cash,. Therefore she has refused the audit.

[Vanessa]

Re: Saood's question

Can you tell me where i can find about lowballing andaudit fee negotition in th GTG studytext?

Answer
This topic is not covered in the GTG text book.

Low balling refers to accepting fees at lower rates than other firms. Accepting lower fees is a audit risk faced by the auditor. It can create a threat of self interest due to not acting with professional competence and due care.

Safe guard for such an assignment would be:
 to maintain records to support the fact that the firm has assigned sufficient staff and spent the required time to carry out the audit.
 to have proper quality procedures with respect to the assurance assignment like compliance with accounting and auditing standards, second partner review, etc