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注会综合阶段英语水平提升班——第三单元2

t-admin154 网校老师 发表于 2017-10-29 16:11:49 | 评论:0  查看:466次 [注会英语]

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四、Practice question
Professional ethics are relevant to both external auditors and internal auditors. You work for a medium-sized accounting firm. Your firm has been asked to tender for the provision of statutory audit and other services to Billington Travel, a private company providing holiday services in the Mediterranean. The company is growing fast and would represent a substantial amount of fee income for your firm. The finance director has explained to you that the company would like the firm to provide a number of different services. These include the statutory audit and assistance with the preparation of the financial statements. The company is also struggling with a new computer system and the finance director considers that a system review by your firm may be helpful. Your firm does not have much experience in the travel sector.
Required:
1. Explain why it is necessary for external auditors to be and be seen to be independent of their audit clients.
2. With reference to the Codes of Ethics, describe the ethical matters that should be considered in deciding on whether your firm should tender for:
1)The statutory audit of Billington Travel.
2)The provision of other services to Billington Travel.
Sample answer:
1. Independence
It is important for external auditors to be independent of their audit clients because external auditors act on behalf of the owners of the business and report on the financial statements prepared by management for the benefit of shareholders.
If external auditors are not independent of their clients, for example if they hold shares in the companies that they audit, their ability to form an objective opinion on the financial statements is impaired.
External auditors must also be seen to be independent because if they are not, the owners of the business will not have confidence in the audit reports that the auditors issue.
National legislation also normally requires external auditors to be independent.
2.(1)The provision of statutory audit
It is important that the firm is competent to undertake the audit; it must have adequate resources in terms of staff with sufficient experience in this sector. The fact that the services to be provided would constitute a substantial amount of fee income indicates that the firm might not, at present, have those resources.
It may be appropriate to consider whether experience in this sector can be brought in, by the recruitment of additional staff.
The firm should consider whether staff is available at the right time of year and whether the work fits in with the firm’s existing obligations.
The firm must be independent of its clients, in particular, this means that it must not take too much of its fee income from one client.
Generally, for non-public interest clients, the fee income should not exceed 15% of the gross practice income.
2)The provision of other services
It is generally acceptable for auditors to provide assistance with the preparation of financial statements for private company clients, provided that the client takes full responsibility for the accounting records and financial statements.
It is important to know why the company needs assistance in this area and it would be preferable in the long run for the company to be able to prepare its own financial statements.
It is important that those preparing the financial statements are independent of those performing the audit as far as possible, in order that the firm is seen to remain independent.
The external auditor is often well placed to provide assistance with systems review as the firm obtains a working knowledge. However, it may be difficult to be critical of the system and this detracts from the firm’s ability to remain independent. It seems preferable not to tender for the systems review.


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