Accounting Theory Assignment #2 To: Mr. Oye Williams By: Fatima E. Manyeh 07436 March 6‚ 2014 1) BDO Seidman’s attorney pointed out correctly that professional standards do not prohibit auditors and client personnel from being ‘friends’. At what point does such relationship result in violation of the auditor independence rules and guidelines? Provide hypothetical examples to strengthen your answers. Health Management‚ Inc. was a pharmaceutical sales company who faced many problems after their
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years‚ the role of auditors become increasingly important especially in a capitalist economy as the process of wealth creation and political stability depends heavily upon confidence in processes of accountability and how well the expected roles are being fulfilled. An auditor has the responsibility for the prevention‚ detection and reporting of fraud‚ other illegal acts and errors is one of the most controversial issues in auditing. The most frequently debated areas amongst auditors‚ politicians‚ media
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such an expert. Foreseeability means that the expert (auditor) does not need to know the recipients. It is sufficient to prove that the person or class of persons exist and is likely relying on the experts’ statements. Hedley emphasised the liability of auditors as the conditions are relatively easy to prove. Caparo Industry Industries vs Dickman (1996) Realizing that foreseeability alone will put very high exposure of the auditors to potential liability and legal proceedings‚ the court
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approach. Thirdly‚ my gratitude goes to my dorm mate and best friends for their constrictive suggestions and comment‚ and to Henok‚ Yibeltal‚ and yohannes who provided me their computers for editing purpose. I want also to thank chief audit executive‚ auditors and all other employees of CBE
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External Auditor’s Independence According to Gillespie‚ Lewis and Hamilton (2004:221) an audit is: “a scrutiny of the accounts by a qualified auditor who carries out checks on the figures so as to establish whether the accounts show a true and fair view of the results and the financial position of the entity.” According to Wikipedia (2011a)‚ auditor independence refers to “an attitude of mind characterized by integrity and an objective approach to the audit process”. Independent auditing has
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be a need for the auditor. Many businesses‚ depending on size and nature‚ employ internal auditors. Their responsibilities and functions‚ while similar to those of an independent auditor‚ are vitally different in a major respect having to do with impartiality and independence. For the purpose of this discussion the terms accountant‚ auditor and certified public accountant (CPA) are used interchangeably and only refer to the "outside" independent auditor. The Role of the Auditor Dependable financial
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References: Following are the seven assumptions of auditing theory stated by Flint (1988): 1 They need to be studied and understood very well by the student auditor. Below we quote them from Filbert ’s Excalibur Revisited (1982). The comments are by the present author. The comments concentrate upon auditing.
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prepared. Preparation of records by employees to cover a fraudulent scheme. Intentional omission of the recording of a transaction to benefit a third party. When assessing the risk of material misstatement‚ auditors evaluate the reasonableness of an entity’s accounting estimates. An auditor normally would be concerned about assumptions that are Susceptible to bias. Consistent with prior periods. Insensitive to variations. Similar to industry guidelines. Which of the following characteristics
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Control risk The auditor obtains an understanding of the design and implementation of internal Control to make a preliminary assessment of control risk as part of the auditor’s overall Assessment of the risk of material misstatements. The auditor uses this preliminary assessment of control risk to plan the audit for each material class of transactions. However‚ in some instances the auditor may learn that the control deficiencies are significant such that the client’s financial statements may
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Practice Paper by FCA Kamal Garg [www.kgma.in] 1. (a) As a Statutory Auditor‚ how would you deal with the following? Mr. Rajesh is appointed as the auditor of NOIDA Travels Ltd. with audit fees of Rs. 35‚000. He purchased air ticket from Delhi to Kolkata and back for Rs. 18‚000 from the client for his personal work and the amount remains unpaid at the end of the year as it is a general practice of the client to give credit to all. Mr. Rajesh claims that he does not incur any disqualification as contained
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