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Audit Assignment 1

Audit Assignment 1

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Published by augmil

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Published by: augmil on Mar 05, 2010
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03/05/2010

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1
1. Other services that the audit firm may provide to the audit client include: institution ofinternal controls; and preparation of financial accounts. Audit firm auditing the sameaudit client may result in the threat of
Self review 
and
Self interest 
.The threat of Self review results when the external auditor is asked by the auditee toexamine and judge the service or system of controls that he provided or institutedhimself. The Self interest threat is as a result of the interest that the audit firm has inmaintaining its relationship with the auditee with respect to the provision of the otherservices. These threats may lead the external auditor to compromise his adherenceto the professional ethics of
Independence 
and
Objectivity 
.The safeguard that the audit firm may employ is to form two(2) whereby one providesthe other services and the other takes charge of the audit assignment. When it isimpossible to have two teams, then, the audit assignment may be subcontracted toanother audit firm.2. The auditee being a major client and also engaged in money laundering may put theexternal auditor in a dilemma. The ethical principle of
Confidentiality 
may bethreatened if appropriate safeguards are not taken.Self interest threat may result when the auditor not wanting to lose the client, will notdisclose the illegal activity of the client. The external auditor may also have financialinterest in the business of the major client or use the information to blackmail theauditee.The appropriate safeguard to take is to report the illegality to the appropriate publicauthority and also to resign from the audit assignment.3. The audit firm, its partners or senior staff having relations with key position holders ofthe audit client may cause the external auditor to comprise his adherence to theprinciple of
Objectivity 
and
Independence 
.The Familiarity threat results from the fact that the external auditor may besympathetic to the interest of the family relations; leading to bias reporting, conflict ofinterest or undue influence.

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