ompany operating in the southeastern part of the West Bank. The company is publicly held, but Hafeth Khalil and his sons control 58 p
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You are an auditor working with JUMAN audit firm. JUMAN audit firm accepted two engagements to audit the financial statements of MUNER company and MUHEET company. Explain how risk of material misstatement should he assessed and what effect that assessment will have on detection risk for the following two audit clients:
- MUNER firm, is a fast-growing trucking company operating in the southeastern part of the West Bank. The company is publicly held, but Hafeth Khalil and his sons control 58 percent of the stock. Hafeth Khalil is chairman of the board and CEO. He personally makes all major decisions with little consultation with the board of directors. Most of the directors, however, are either members of the Khalil family or long-standing friends. The board basically rubber-stamps Hafeth Khalil's decisions.
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- Moranda and Sills, LLP, has served for over 10 years as the auditor of the financialstatements of Highland Credit Union. The firm is conducting its audit planning for the currentfiscal year and is in the process of performing risk assessment procedures. Based on inquiries andother information obtained, the auditors learned that the credit union is finalizing an acquisitionof a smaller credit union located in another region of the province. Management anticipatesthat the transaction will close in the third quarter, and, while there will be some challenges inintegrating the IT systems of the acquired credit union with Highland systems, the bank shouldrealize a number of operational cost savings over the long term.During the past year, the credit union has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from chequing and savingsaccounts. The system has been well received by customers and the credit union hopes to continue…You are the manager in charge of the audit of Nananom Company, a public limitedliability company which manufactures specialist equipment and costumes for usein Kumahwood and Nafftti films in Ghana. Audited revenue is Ghc 100 million with profit before tax of Ghc 6.25 million.Audit work up to but not including, the obtaining of written representations hasbeen completed. A review of the audit file has disclosed the following outstandingpoint:KumahwoodNananom Company is facing a potential legal claim from the Kumahwood company in respect of a defective equipment that was supplied for one of their films. Kumahwood sustains that the equipment built was not robust enough, whilethe directors of Nananom argue that the specification was not sufficiently detailed.Nananom were of the view that using such sophisticated equipment under conditions that require heavy falls, may render them not in the best of working conditions after a couple of films produced. However, this is what…For each of the following situations involving relations between auditors and the companies they audit, indicate whether it violates IFAC’s Code of Ethics for Professional Accountants and the rationale for the applicable guideline. Paul Asante, CPA, discloses confidential information in a peer review of the firm’s quality control procedures. Frank Smith, CPA, is auditing a company in Ghana, which has offered to send him and his wife on a holiday in Hawaii for two weeks. Tabula Gonzales, CPA, says in an interview in the local paper that Emilio Rios, CPA, misleads his clients about the quality of his audit work.
- The following are three situations, all involving private companies, in whichthe auditor is required to develop an appropriate overall audit strategy and approach:1. The client has inventory at approximately 50 locations in a three-province region. Theinventory is difficult to count and can be observed only by travelling by automobile. Theinternal controls over acquisitions, cash disbursements, and perpetual records are considered effective. This is the fifth year that you have done the audit, and audit results in pastyears have always been excellent. The client is in excellent financial condition.2. This is the first year of an audit of a medium-sized company that is considering selling itsbusiness because of severe underfinancing. A review of the acquisition and payment cycleindicates that controls over cash disbursements are excellent but controls over acquisitions cannot be considered effective. The client lacks receiving reports and a policy asto the proper timing to record…You are an audit manager at Hall & Associates, who have been approached toconduct the audit of Computer Games Ltd (CGL), a manufacturer of interactivecomputer games, for the year ended 30 June 2019.Hall & Associates has not previously audited CGL’s financial report, although ithas undertaken other types of engagements for CGL. Last year CGL hired Hall& Associates to assist in the redesign of CGL’s accounting software to ensurethat internal controls over internet sales were adequate to ensure theconfidentiality of customer data and accuracy of recording. The new softwarewas implemented at the beginning of the current year and appears to beworking satisfactorily. As part of this year’s audit, you expect to review theinternal controls at CGL, including the controls within the IT systems.As part of CGL’s financing arrangements with its bank, Easymoney Ltd, it hasa loan covenant that stipulates that the quick asset ratio cannot be less than1:1 or Easymoney Ltd has the right to…For each of the following situations involving relations between auditors and the companies they audit, indicate whether it violates IFAC’s Code of Ethics for Professional Accountants and the rationale for the applicable guideline. a) Paul Asante, CPA, discloses confidential information in a peer review of the firm’s quality control procedures. b) Frank Smith, CPA, is auditing a company in Ghana, which has offered to send him and his wife on a holiday in Hawaii for two weeks. c) Tabula Gonzales, CPA, says in an interview in the local paper that Emilio Rios, CPA, misleads his clients about the quality of his audit work. Additional information: Please add references or citations.
- Imagine that you are a senior auditor and your firm has been selected to audit a medium-sized company with a single location. Describe the four phases of an audit and discuss the key factors that would help you determine how to plan the audit for this company. Provide specific examples. Determine both the relationship of risks in the planning of the audit and factors that influence those risks. Speculate on which type of risk creates the most uncertainty for the auditor and recommend at least two ways to plan the audit to mitigate those risks. Provide specific examples.You have accepted the engagement of auditing the financial statements of the C. Reis Company, a small manufacturing firm that has been your client for several years. Because you were busy writing the report for another engagement, you sent a staff accountant to begin the audit with the suggestion that she start with accounts receivable. Using the prior year’s audit documentation as a guide, she prepared a trial balance of the accounts, aged them, prepared and mailed positive confirmation requests, examined underlying support for charges and credits, and performed other work she considered necessary to obtain evidence about the validity and collectability of the receivables. At the conclusion of her work, you reviewed the audit documentation she prepared and found she had carefully followed the prior year’s audit documentation.Required:The opinion rendered by auditors states that the audit was made in accordance with generally accepted auditing standards. Identify the important…Bank Oman is a publicly traded company. You were part of the team that was hired to conduct an audit of the financial statements of the company for the previous year. After detailed examination of controls and transactions, you discovered a few immaterial misstatements in their accounting practices which were immediately corrected by management. These misstatements include errors in the computation of depreciation and valuation of the inventory. In this situation, what type of audit report could your team possibly give to Bank Oman? a. Qualified opinion b. Adverse opinion c. Disclaimer of opinion d. Unqualified opinion
- For each of the following situations involving relations between auditors and the companies they audit, indicate whether it violates IFACs Code of Ethics for Professional Accountants and the rationale for the applicable guideline. a.Paul Asante, CPA, discloses confidential information in a peer review of the firms quality control procedures. b.Frank Smith, CPA, is auditing a company in Ghana, which has offered to send him and his wife on a holiday in Hawaii for two weeks. b.Tabula Gonzales, CPA, says in an interview in the local paper that Emilio Rios, CPA, misleads his clients about the quality of his audit work.The audit partner has just advised you that he has been approached to accept the appointment of auditor to Games Limited. Games Limited is a manufacturer of gaming machines and has been named in a recent anti-corruption inquiry as having offered incentives to state government members to support a proposed bill which would allow an increased number of gaming machines in licensed premises. No charges have yet been laid against Games Limited or any of its employees. The audit partner explains to you that Games Limited’s auditors were re-appointed for the current financial year at the Annual General Meeting held two months ago. However, Games Limited’s managing director is unhappy with the existing auditing firm as the audit partner assigned to Games Limited has been changed. Required: The audit partner is unsure whether he should accept the appointment and has asked you to outline any ethical, legal and other factors to be considered in his decision about whether to accept the…Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk.
