Considerations When Appointing Auditors
Middletons & Gramjon Limited
a) Describe the matters that the partners of Middletons should have considered and the procedure(s) the firm should have carried out in determining whether it should accept the appointment as auditors to Gramjon Limited.
The most general definition of an audit is an evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the validity and reliability of information, and also provide an assessment of a system 's internal control. (Wikipedia, 2009) Auditors have to do a lot of research on a firm before accepting an appointment. The main matters they must consider are; • Fees – It is recommended that fees from any one client should not surpass 15% of the gross fees of the audit firm. • Legislation – Auditors must be familiar with the most recent Companies Act and follow the International Standards on Auditing. • Ethics – All auditors are bound by codes of professional ethics under ISA 200. These include integrity, independence, objectivity, confidentiality and professional competence. • Conflicts of interest – The auditor should not make any executive decisions for the company, or provide any accounting assistance. It is the responsibility of the management to prepare the statements, the auditor just checks and verifies the items. • Resources – This includes making sure that staff within the firm possess the adequate skills to fulfill their duties. This is important because it is the responsibility of the management to prepare the financial statements – the auditors just check them. Similarly, it is important other employees can do their jobs properly, or the statements may be prepared on a false basis.
Boynton and Johnson (2006) outline six procedures that an auditor should undertake when deciding whether to accept an appointment; • Evaluating integrity of management – The auditor must be confident that the management of the firm can be trusted. Error
a) Describe the matters that the partners of Middletons should have considered and the procedure(s) the firm should have carried out in determining whether it should accept the appointment as auditors to Gramjon Limited.
The most general definition of an audit is an evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the validity and reliability of information, and also provide an assessment of a system 's internal control. (Wikipedia, 2009) Auditors have to do a lot of research on a firm before accepting an appointment. The main matters they must consider are; • Fees – It is recommended that fees from any one client should not surpass 15% of the gross fees of the audit firm. • Legislation – Auditors must be familiar with the most recent Companies Act and follow the International Standards on Auditing. • Ethics – All auditors are bound by codes of professional ethics under ISA 200. These include integrity, independence, objectivity, confidentiality and professional competence. • Conflicts of interest – The auditor should not make any executive decisions for the company, or provide any accounting assistance. It is the responsibility of the management to prepare the statements, the auditor just checks and verifies the items. • Resources – This includes making sure that staff within the firm possess the adequate skills to fulfill their duties. This is important because it is the responsibility of the management to prepare the financial statements – the auditors just check them. Similarly, it is important other employees can do their jobs properly, or the statements may be prepared on a false basis.
Boynton and Johnson (2006) outline six procedures that an auditor should undertake when deciding whether to accept an appointment; • Evaluating integrity of management – The auditor must be confident that the management of the firm can be trusted. Error