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March 2021
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Acc180912973

Acc180912973

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Ans A.1 – The case of the DDPL is where the company is involved in the issues related to

polluting the environment, they are under the constant watch of Environmental Protection

Agency for spilling the toxic chemicals in the nearby river. The Audit company R. David &

Associates was approached for the Auditing process. So as an Auditor there are some

fundamental principles, on the basis of which an Auditor can accept or decline the engagement

process with the company. The key ethical issues in that scenario which are needed to be

considered are as;

1) Threats to compliance with the fundamental principle

2) Significance of the Threat identified

3) Safeguards are workable or not.

In that case when the auditor think that there are circumstances and situation which are creating

threats to the compliance of the fundamental principle of the Auditing process, in that scenario

auditor should not directly go with the auditing process and assess the situation whether the

polluting activity the company is involved in is at the acceptance level or not, in Yes then they

should continue with the process of Auditing and if not, as it is mentioned in the case that the

waste DDPL in spilling is highly toxic and polluting the water which can be harmful for the

people living around the river. In that scenario Auditor should confirm whether the situation can

be controlled or not by available safeguards that can help to eliminate the threat, if yes then the

duties can be continued and if not then the process can be rejected, however what we have

understood from the description that company DDPL is trying to cover-up the spilling of toxic,

though the solution is if the company DDPL accepts the spilling and accept the process of

safeguarding the environment then the Auditor can continue their duties, if not then the Auditor

can reject the offer of engagement to follow the fundamental principle of professional ethics.

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Ans A.2 – In the current case Auditors has read some control weaknesses and errors because of

the hedging strategy and wants further actions from the treasurer’s end, as treasurer is the person

responsible for the hedging strategy. The reason company DDPL, followed the hedging strategy

is to cover-up the losses they are incurring because of the fluctuation in the exchange rates, and

company deals in large amount so a small change in the exchange rate can significantly impact

the revenue of the organization.

In the current scenario the Auditor should focus on the intention regarding the erroneous

transactions and high risk transactions, there should be a direct misstatement in the financial

statement and intent of misstatement. On the other hand the complexity of the of the

organizations business model is also the key point to look after as it can play a major role in the

auditors risk assessment of the errors in the financial statement. The auditor should analyze if the

error in the statement are because of any Fraud or are general accounting errors because of the

Exchange rates. In terms of understanding the company’s control, the auditor should focus that

they are operated by the person who are having the necessary and authority to perform the

control effectively.

The Auditor should focus on the pattern of errors whether the company has history of errors or

this is one of the incidents of the error.

As it is visible from the case that, the company followed the hedging strategy to avoid the loss

incurred by the exchange rates, in case of inexperience in hedging strategy, the possibility of the

error might arises and it is visible in the financial report that hedging is the reason of the errors

and control weakness, they are needed to be controlled and company should find out the ways to

control and prevent the errors caused by the process.

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Ans A.1 – The case of the DDPL is where the company is involved in the issues related to polluting the environment, they are under the constant watch of Environmental Protection Agency for spilling the toxic chemicals in the nearby river. The Audit company R. David & Associates was approached for the Auditing process. So as an Auditor there are some fundamental principles, on the basis of which an Auditor can accept or decline the engagement process with the company. The key ethical issues in that scenario which are needed to be considered are as; 1) Threats to compliance with the fundamental principle 2) Significance of the Threat identified 3) Safeguards are workable or not. In that case when the auditor think that there are circumstances and situation which are creating threats to the compliance of the fundamental principle of the Auditing process, in that scenario auditor should not directly go with the auditing process and assess the situation whether the polluting activity the company is involved in is at the acceptance level or not, in Yes then they should continue with the process of Auditing and if not, as it is mentioned in the case that the waste DDPL in spilling is highly toxic and polluting the water which can be harmful for the people living around the river. In that scenario Auditor should confirm whether the situation can be controlled or not by available safeguards that can help to eliminate the threat, if yes then the duties can be continued and if not the ...
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