Need accounting help with Auditor's Role and Responsibilities (Accounting 403 Auditing I)

User Generated

gobar1987

Business Finance

Description

  • Create a scenario where it would be acceptable for an external auditor to accept an audit engagement without having knowledge of a client's business environment. Ascertain the key legal ramifications and risk mitigation strategies associated with an auditor performing the audit. Support your position.

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Thank you for the opportunity to help you with your question!

an orditor needs to obtain an understanding of the client’s business,this is the  key to an effective and efficient audit. It enables one not only to tailor our work to meet the individual facts and circumstances of each client, but also to carry out that work and to evaluate our findings in an informed manner. the knowledge of the client’s business also helps an auditor to develop and maintain a positive professional relationship with the client.

International Standards on Auditing (ISA) 315 states that the auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures.

Understanding the entity is an iterative process, continuing throughout the entire duration of the audit.

Prior the accepting an audit engagement, the auditor should obtain a preliminary knowledge of the industry and of the ownership, management and operations of the entity to be audited.

Detailed information is required at the planning stage of the audit to enable auditors to plan their  work adequately. one needs to understand the nature of client’s business, its organization, its method of operation and the industry in which it is involved. This understanding enables us to appreciate which events and transactions are likely to have a significant effect on the financial statements.


Please let me know if you need any clarification. I'm always happy to answer your questions.


Anonymous
I was struggling with this subject, and this helped me a ton!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags