Auditing Case

808 Words4 Pages
Audit case
You are the engagement partner in a firm of chartered accountant and are reviewing the audit fire of a client ABC ltd. the audit manager has recommended that the audit option is qualified because he is in dispute with the directors of ABC ltd. The audit manager wishes the directors to create a large doubtful debts provision against a major debtor that is over six months old. The directors do not witch to alarm the public about the current liquidity problems of their major costumer because they are sure that as soon as their costumer has completed the development on their latest product, which is due to finish very soon, the costumer will settle their debt. The audit manager says that the client has contacted another for a
…show more content…
The auditor must remain independent, in mind and in appearance, at all times. They should also discuss this with the audit committee.

b) Examine how an audit committee could help to resolve this situation
One of the functions of an audit committee is to monitor the periodic reviews of the accounting and financial reporting processes and systems of internal control that are conducted by the company 's independent auditors, financial and senior management and internal auditing department. So in this case, the AC could review the company 's internal control processes regarding following up on long outstanding debtors and adherence to the credit terms granted to customers. If 6 months is way overdue, and the internal auditors haven 't picked this up, then there is a failure of the internal audit function, as well as a failure of the accountant in following its own accounting policies. The AC has to take a stand and either support the external auditors or give its reasons why it doesn 't.

c) What are the professional rules regarding the provision of multiple services and how these rules may be applied in this case?
Firms have traditionally provided to their assurance clients a range of non-assurance services that are consistent with their skills and expertise. Assurance clients value the benefits that derive from having these firms, which have a good understanding of the business, bring their knowledge and skill to bear in other areas.
Get Access