Auditing and Assurance Services A Systematic Approach

Question: Discuss about the Auditing and Assurance Services for A Systematic Approach. Answer: Introduction: Auditing is the verification of the accounts and the report prepared by the auditors forms an integral part of the financial statement being audited. Qualified and unqualified audit report is two types of the audit report prepared by the auditors. Qualified audit reports comes with the limitation in the scope of the work performed by auditors. The unqualified report on the other hand propose that the business has presented its financial statements in a fairly manner in all the material aspects (Arens, 2016). In the given case, the unqualified audit report of the Impulse Pty limited for the year 2012 ending 30th June was presented by the King and queen. The company witnessed a drop in the inventory and asset turnover accompanied with lack of liquid assets. King and queen was well acquainted with the facts but no additional action was taken by the audit firms in valuing the assets. EFL granted the loan to the Impulse Pty limited based on the audit report prepared by the King and queen. EFL was unable to recover the amount of loan which was mainly attributable to the negligence of the auditors (Beasley et al., 2012). The cases which are specific to the relevance relating to the answer above is given below: The case is about the auditing done by the KPMG and the case was Law Society vs. KPMG Peat Marwick and Others; CHD 3 NOV, 1999. The compensation fund of the society relies on the decision of the auditors, which the auditing firm was very well acquainted with. Due to the negligence on the part of the auditors, the society was not able to discover the malpractices. In this regard, the auditors was held liable for neglecting the professional responsibility (Eilifsen et al., 2013). Another case can be considered of the Hedley Byrne and Co Ltd v Heller and Partners (1964) AC 465. The procedure and the good conduct of the audit of the company was impacted by auditors negligence. The judgment was passed by the court that the report presented by the auditors has an impact on the decision taken by the firm being audited. The answer to this question would depend on the consent of the audited party. As per the principle of confidentiality, no disclosure about the confidentiality of the firms being audited should be made by the auditors. In some special case, the disclosure can be made by the auditors on the special instruction given by the company being audited (Glover et al., 2014). If the Impulse Pty Limited has asked the King and queen to disclose the information about its financial health, and if they did not disclose the information, then they would be held liable to EFL. On the other hand, if the Impulse Pty Limited has instructed the King and queen not to disclose the information as disclosure of the internal information are against the GAAP principles. In this case, King and Queen cannot be held liable to EFL. Actual independence: The actual independence mainly concerns with the state of mind of the auditors and the way auditors deal with the particular situation. Another name of the actual independence is the real independence. It is the capability of the auditors to make the independent decisions on the audit report of the company despite the fact that they have been placed in the compromising situation by the directors of the company (Louwers et al., 2013). The goal of independence of the auditors is achieved by the actual independence. The credibility and the reliability of the financial statements are validated and assured by the actual independence. The task of the auditing can be performed in an unbiased and objective manner. Perceived independence: The perception of the auditors in tackling and solving the various problems concerning the audit is the perceived independence. A particular situation is perceived by the auditors in different way, which helps them in arriving at the optimal solutions. Since the perception varies across auditors, the perceived independence cannot be judged using any particular process. The consideration of the independence of the auditors by the third party form the client by looking into the arrangement is the perceived independence (Stuart 2012). Bob is performing the two task at a time in the scenario one. He is undertaking the studies at the University and is the audit assistant of the Club Casino. While auditing the accounts of Club Casino, he came across some confidential information, which he used completing his assignment by deleting all the references and doing this made him breach the fundamental principle concerning confidentiality. The confidentiality of the information needs to be maintained by the auditors while performing the process of auditing. Bob has disclosed the financial information by using the same in the assignment and thus breaching the integrity and confidentiality information (Messier 2016). Ace Limited has Wendy as its audit partner for long time. Wendy has been asked to performing the duties of company secretary for the period of six month. The section 130, requires the entity to perform the obligation in accordance with the regulations and rules and should not perform that would disregard its profession. The principle of professional competence is getting breached by the appointment of Wendy for temporary handling the duties of the company secretary. Assigning Leo to perform the task of auditing, when he is entitled to perform the internal control system of the payment of the cash is regarded as breaching the fundamental principle of integrity. It is prescribed by the audit principles, that the son, daughter, relative or an employee cannot become the audit partner of the company. Removal of Leo from the auditors position should be the remedial action. The non-payment of the audit fees by the classic reproduction to their audit firm, Chan and associates lead to former receiving threats. Payment of the fees using the furniture and offering the shares of the unlisted company would not be regarded as morally acceptable. This would lead to the breaching of the principles relating to the audit fees and acceptance of the gifts in kind is regarded as unethical (William et al., 2016). Reference: Arens, A. A. (2016).Auditing and Assurance Services: Student Value Edition. Prentice Hall. Beasley, M., Elder, R., Arens, A. (2012). Auditing and assurance services. Eilifsen, A., Messier, W. F., Glover, S. M., Prawitt, D. F. (2013).Auditing and assurance services. McGraw-Hill. Glover, S. M., Prawitt, D. F., Messier, W. F. (2014).Auditing assurance services: a systematic approach. McGraw-Hill Education. Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., Thibodeau, J. C. (2013).Auditing and assurance services. New York, NY: McGraw-Hill/Irwin. Messier Jr, W. (2016).Auditing assurance services: A systematic approach. McGraw-Hill Higher Education. Stuart, I. (2012).Auditing and assurance services: an applied approach. McGraw-Hill/Irwin. William Jr, M., Glover, S., Prawitt, D. (2016). Auditing and Assurance Services: A Systematic Approach.Auditing and Assurance Services: A Systematic Approach.