RUVIMBO KACHAMBGWA P0982Q AUDITING HOMEWORK

Required
Discuss any concerns that are evident with regard to the information provided
from the discussion at the audit manager/partner meeting and the email sent
by Barney Stenson with reference to ISA 220, ISQR 1 and other relevant ISAs.

Leadership
 There is a concern that the partners have not taken the role of ensuring that
the firms quality controls are in place and a constant monitoring of the firm’s
performance with regards to its engagements. While the audit firm is under
fee pressure and the employees have been tasked with bringing more clients
to sustain business, the partners have decided to go on a Partners Strategy
Retreat for three weeks leaving audit managers to perform their duties.
 ISQR 1 states that the firm’s managing board of partners should assume
ultimate responsibility for the firm’s quality control.
 There is a major concern that the partners have already assumed that the
Financial Statements for Bridge Fire Ltd are pretty clean just because they are
a listed client. Listed companies may be riskier since they have many
stakeholders who might be interested in their Financial Statements and this
may result in pressures to present attractive Financial Statements and window
dressing of reports.
 This assumption by the partner may result in the audit firm not performing
adequate risk assessment resulting high detection risk hence an inappropriate
opinion might be given.
 There is concern that the senior audit partner, Mr Benson Stenson has
delegated his full responsibility of reviewing audit engagement work of Bridge
Fire (ZW) Ltd to Jack Donaghy who has recently been promoted to audit
manager.
 Partners should delegate work to employees whom they are sure have
sufficient and appropriate experience and ability, and the necessary authority,
to assume that responsibility.
 Jack might not be competent enough to take up such a role since he has just
been promoted to management and it will be his first time to audit a listed
company.
 There is a concern that the partners have been asked to provide 3 rd year
senior clerks for secondments yet they are planning of sending in 2 nd year
clerks too to take opportunity of receive risk free cash flows.
 It is the partner’s responsibility to make available trained, competent staff who
have been requested and be truthful to the international offices about the
quality of personnel they would be providing.

Acceptance and continuation of audit clients

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 There is concern that the Partners are about to take a large reduction in their
bonuses as they are under fee pressure and in need to gain additional audit
clients.
 The desperation to gain more audit clients and to keep their bonuses might
affect their responsibilities of ensuring a proper procedure to be followed
before accepting or continuing with an audit client.
 ISQR 1 requires that the integrity of the client should be considered before
accepting an engagement so that the audit firm is associated with clients who
are not of questionable character.
 There is concern that the Benson has already prepared an engagement letter
template that is already pre-signed with his signature to give potential audit
clients.
 Engagement letters should be specific to each client as it lays out the agreed
terms of the audit, the clauses and fees to be charged hence it cannot be a
one size fits all scenario.
 It is of concern that Stenson and Partners have accepted an audit
engagement with Bridge Fire when they have no competent staff who will be
able to perform a quality audit in a professional manner.
 The audit firm has sent all of its 3rd year experienced clerks and some of its
2nd year clerks for secondment and to fill in the gap they have hired
incompetent staff whom have no background of finance and accounting
knowledge.
 An audit firm should accept engagements were they are sure they are
competent to prform and have the capabilities and resources to do so.
 It is of concern that the partners have threatened audit managers with
dismissal if they are not able to bring in at least one audit client.
 The audit managers might be under pressure to bring in audit clients and may
not follow laid down procedures to follow before accepting new audit clients.
 This might result in the firm being associated with risky clients
 There is concern that Stenson has been hit with a difficult financial year where
they are under fee pressure and it is becoming more challenging to keep their
small clients. The partners may not be willing to decline the continuation of an
existing client even if it might result in questionable character on the audit firm
because they are in desperate need of the audit fee.
 Proper procedures may not be followed in determining whether the firm
continues with an audit client or reject it.
 There is a concern that Stenson and Partners may have not been able to
discuss factors that might be of concern regarding Bridge Fire with their
predecessor auditors since they were fired without due process.
 There is concern that John has accepted to be the audit manager for Bridge
Fire when it is certain that his ethical requirements are not met.
 There is a familiarity threat to independence because the CEO of Bridge and
Fire is John’s uncle.

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RUVIMBO KACHAMBGWA P0982Q AUDITING HOMEWORK

Human Resources
 It is of concern that Stenson and Partners have decided to recruit staff who
are incompetent and have no experience or background in accounting in
order to fill in for the experienced staff that have gone on international
secondment.
 The audit firm is required to put in place policies and procedures that will
enable to firm to recruit competent staff who will be able to provide quality
service and perform quality engagements.
 Audit engagement teams should comprise of staff with complimenting
capabilities.
 There is a concern that the partners are willing to look for cheap labour who
will be doing the dirty work yet they are charging their client normal rate used
on competent staff.
 Audit fees should be based on the time spent and the expertise needed to
effectively perform the audit and provide an appropriate audit opinion.
 The firm is required to perform engagements with professional standards and
applicable legal and regulatory requirement.
 The remuneration given to employees should be fair
 There is concern that the partners do not provide many opportunities for the
audit managers to become partners at the firm.
 The firm should prove to be an equal opportunity employer were employees
may advance and become motivated. There is a risk that the firm might not be
able to retain their experienced staff due to lack of advancement
opportunities.
 There is a concern that the partners are willing to send their experienced staff
for international secondment leaving the firm to be understaffed.
 Audit firms should make sure they have enough competent staff to perform
audit engagements so that they are able to provide their clients with the best
services.
 There is a concern that the audit managers have been threatened with
dismissal in the event they fail to bring a new audit client.
 There should be job security within audit firms to ensure employees can
perform their duties without fear and undue influence in a safe working
environment.
 There is a concern that the Partners have asked their subordinates to help
them in the recruitment process by informing any family members of
associates about the job offer.
 The recruitment procedures are weak or there are no defined policies and
procedures that the firm follows when recruiting new members for example,
having a formal advertisement for vacant position, shortlisting candidates and
evaluation of candidate’s qualifications.
 This may result in recruitment if incompetent staff who will perform low quality
services.
Ethical Requirements

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RUVIMBO KACHAMBGWA P0982Q AUDITING HOMEWORK

 There is a concern that the Partners are charging their clients audit fees that
do not reflect the quality of services they are rendering.
 They are charging audit fees on the basis that Bridge Fire can afford to pay
yet they should charge on the basis of services that they are providing.
 They are using cheap labour and charging at normal rate without informing
the client.
 Audit fees should be based on the time spent and the expertise needed to
effectively perform the audit and provide an appropriate audit opinion.
 This gives question to professional due care and professional behaviour of
partners of Stenson and Partners
 There is concern that Jack will be the audit manager for the Bridge and Fire
audit yet his uncle is the CEO who is charged with the preparation of its
financial statements.
 Jack has a familiarity threat and should not have been awarded the audit
since it will affect his independence.
 There is concern that Stenson and Partners may not have established policies
and procedures that are required to evaluate each employees’ independence
at the beginning of each audit engagement hence they may have awarded
Jack the audit engagement of Bridge Fire without knowing the reparations of
his independence.
 There is concern that the Partner has given Jack permission to charge
personal entertainment costs on a clients’ tab which they should not be billed
for
 The overall bill for the client is going to be overstated with an expense that
does not relate to them
 This shows gross incompetence on the partner who has acted without
integrity.
Engagement Performance
 There is a concern that the Partner has delegated his duties with regards to
the audit engagement of Bridge Fire to Jack who has no experience with
auditing a listed company.
 For a complex client like a listed client, the audit partner should provide
continuous review and consultation on matters that may prove to be complex
to Jack
 The overall responsibility of coming up with an appropriate audit opinion will
rest with the Partners even in the event they delegated the responsibility.
 There is concern that there are no sufficient staff who are competent enough
to perform the audit of Bridge Fire since most of the employees are new
recruits who have less finance background.
 The audit performance will be determined by the quality of personnel that are
conducting the audit hence less competent staff have higher risk.


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 There is a concern that the audit firm might not outsource staff who are well
vested in audit of listed companies since they are more concerned with
retaining the cash flows coming into the company.
 There is a concern that Stenson and Partners may not have engaged in
Engagemnet Quality Control Review (EQCR) as this is a general requirement
by ISQC 1 for all audits of listed companies.
 An EQCR is a mandatory requirement when conducting audit on listed entities
there should be laid out policies and procedures setting out nature, timing and
extent of an EQCR.
Monitoring
 There is concern that the Stenson may not be involved in the contionous
monitoring of the firm quality controls as is not concerned with reviewing
Jack’s work on the audit of Bridge Fire but is more concerned on the signing
of the audit opinion
 ISQR 1 requires constant monitoring and evaluation on controls put in place
by management so that the firm continuous to provide quality services.
 It is of concern that

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