( a ) Explain four affairs that your audit house should see before make up one’s minding whether to accept the client.
First, Suasa should explicate to HijauSdnbhd the demand to do an enquiry of LGT. Suasa should bespeak permission to make so in order to acquire the footing of the client ‘s concern and ground on alteration of hearer.
Suasa should inquire HijauSdnbhd to empower LGT to react to the full to Suasa ‘s enquiries. Without the authorise, LGT can be refuse to react to Suasa.
If LGT refuses to allow HijauSdnbhd to react or limits HijauSdnbhd ‘s response, Suasa should ask to the grounds and see the consequence in make up one’s minding whether to accept or reject the battle.
Suasa should do specific enquiries such as,
Facts that might be bear on the unity of the direction.
Disagreements with the direction such as scrutinizing processs, accounting rules or any other important affairs.
HijauSdnbhd should understand the grounds of the alteration of hearers.
( B ) Explain why it is necessary for your audit house to compose to the present hearers.
First, the new audit house should understand the ground sing the alteration of hearer. It prevents the new audit house engage with a client that has non conformity with criterion required.
The new audit house should cognize whether there are possible menaces for client to conformity with the cardinal rules by asking present audit house. It refers to a short manner and low cost method to hold footing cognition about the client ‘s concern. Based on the written papers to measure whether there are any inquiries over the unity of the possible client which create unacceptable hazard.
( degree Celsius ) Letter of battle will be issued one time Suasa Audit decided to accept being Hijrah ‘s hearer.
I. State three intents of the missive of battle.
An engagement missive helps in avoiding misinterpretations sing with the battle.
It paperss and confirms the hearer ‘s credence of the assignment, the aim and range of the audit, the hearer ‘s duties to the client and any of the studies.
It defines direction duties such as internal controls, direction ‘s duty to forestall and observe fraud.
two. Who will fix the engagement missive above?
Hearer or Suasa Audit SdnBhd
( vitamin D ) State two differences between internal hearer and external hearers.
Appointment.
External hearers are appointed by the client ‘s stockholders and they must be independent of the company. However, internal hearers are usually employees of the administration.
Duty.
External hearers are responsible and study to the proprietors of the company and audit house. However, internal hearers are responsible and study to senior direction.
Question 2
( a ) Internal papers
d. Credit memo in client ‘s file.
e. The board ‘s proceedingss of meetings from the director ‘s file.
f. Unpaid verifiers from the verifiers file.
g. Transcripts of gross revenues bills from client ‘s file.
h. Transcripts of natural stuff requisitions from shopkeeper.
k. Copy of following twelvemonth ‘s budget from the comptroller.
l. Copy of internal hearer ‘s study to the audit commission.
m. Letter from the finance director, in client ‘s file, as authorization to compose off a debt.
External paperss
a. Statement from a provider obtained by the hearer from client ‘s file.
B. Bank statement sent straight to the hearer.
c. Punch card obtained from the wages section.
I. Bank statements from client ‘s file.
J. Letter from debt aggregator from client ‘s file.
( B ) Why are external paperss more dependable than internal paperss?
External papers is more dependable comparison to internal papers. It is because external papers is derived from outside independent parties. Auditor believes that the external papers has higher independency and verifiability. The internal papers merely the record made up and maintain within the auditee during the accounting period. Internal papers merely see as dependable when the related internal control is satisfactory.
However, the external papers that obtained by hearer from exterior is more dependable than obtained from auditee. The external papers in signifier of papers or in composing signifier is more dependable than in unwritten signifier.
( degree Celsius ) Discuss the dependability of each papers.
Item
Dependability
Reasons
a. Statement from a provider obtained by the hearer from client ‘s file.
Average
It obtained from auditee
B. Bank statement sent straight to the hearer.
High
It obtained straight from foreigners
c. Punch card obtained from the wages section.
Average
It obtained from entity alternatively of employee
d. Credit memo in client ‘s file.
Low
Internal record prepared and obtained by auditee
e. The board ‘s proceedingss of meetings from the director ‘s file.
Low
Internal record prepared by auditee
f. Unpaid verifiers from the verifiers file.
Low
Transcripts prepared and obtained from auditee
g. Transcripts of gross revenues bills from client ‘s file.
Low
Transcripts prepared and obtained from auditee
h. Transcripts of natural stuff requisitions from shopkeeper.
Low
Transcripts prepaid and obtained from auditee
I. Bank statements from client ‘s file.
Average
Document obtained from auditee ‘s file.
J. Letter from debt aggregator from client ‘s file.
Average
Document obtained from auditee ‘s file.
k. Copy of following twelvemonth ‘s budget from the comptroller.
Low
Internal record prepared by auditee
l. Copy of internal hearer ‘s study to the audit commission.
Low
Internal record prepared by auditee ‘s employee
m. Letter from the finance director, in client ‘s file, as authorization to compose off a debt.
Low
Letter prepared and obtained from auditee
Question 3
( a ) Analytic processs are non so dependable but are really of import to the hearer.
Normally, it is perform based on the hearer ‘s opinion alternatively of other certification from foreigner. The certification is derived from the auditee. So it is consider less dependable. Harmonizing to SAS No. 56 is required hearer uses the analytical processs when execute the audit process. Besides that, It is of import and efficiency for hearer as it is comparatively low cost and effectivity in determine the possible misstatement.
( B ) Inquiries of the client are non so dependable.
It is because it usually in unwritten signifier. Therefore, hearer should necessitate written certification or certified by independent party for any unwritten enquiry. Document that derived from client is less dependable comparison to outsider due to low independency. Inquiry is non sufficient to execute the operation of control. Therefore, hearer should execute extra audit process if inquiry incurs in order to acquire sufficient and appropriate audit grounds.
( degree Celsius ) Observations are less dependable compared with verification.
Observation does non affect any certification or composing papers. It is limited to the clip at which the observation carries out. There may be a misleading or maniplated act of being observed.
Confirmation is more dependable due to higher independency of the foreigner corroborating the papers.
( vitamin D ) Physical scrutinies and the scrutiny of paperss can be dependable under certain conditions.
It depends on the nature and the beginning of the papers being scrutiny. The scrutiny of the external papers considers dependable comparison to internal papers.
While the physical scrutiny of touchable assets such as fixed assets consider high reliable comparison to intangible assets such as stock or portion. It is because hearer able to verify the being the touchable assets by physical scrutiny. The physical scrutiny that carries out by hearer is more dependable than other party.
( vitamin E ) Factors that can lend towards the dependability of grounds obtained orally.
The nature of the grounds. The unwritten representation that confirm by the written papers is more dependable than merely unwritten representation. As it is in physical grounds.
The beginnings of the grounds. Oral representation from foreigner such as lawyer is more dependable comparison to the memo record in the entity.
The resources keeper. The resources obtained straight from foreigner is more dependable than the orally representation from auditee file.
( degree Fahrenheit ) Situation where verifications are non so dependable
First, verification obtained from auditee alternatively of foreigner. It may be manipulated by the auditee.
Second, transcripts of verification alternatively of original obtained from auditee file. A photocopy of papers is less dependable than original papers.
Next, the verification is in unwritten signifier alternatively of written papers. Oral representation is less dependable than written certification.
All of the above state of affairs may cut down the dependability of the verification as audit grounds.
