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1. If a non-listed client of doubtful reputation, intends to apply a bank finance (the bank is unaware of its doubtful reputation),
which type of assurance is needed?
?Audit or Limited assurance review ? or decline?2. Can a listed company’ director request the audit team to compute his personal tax for tax authority?Would it consider as self-review / advocacy?
3.If an audit assistant is the brother of a cashier. And this cashier has committed a immaterial fraud.
Should remove this audit assistant from the audit team? despite his seniority is quite low ?
Should inform the client’s audit committee of this relationship?4. The audit client is a financial instituition which is a public listed entity as it provides funds to various SMEs. The finance director has stolen the company money but the amount is immaterial.
Isn’t it NOCLAR? need to report to the relevant regulator by the auditor?I didn’t sit in March so didn’t see these specific Qs but these are my thoughts:
1. It depends … if this is an audit client, the preconditions of an audit should be present (if not, the engagement should not be accepted). If the reputation is not so doubtful that the audit can be accepted, what is it that the auditor is being asked to report on in connection with the application for bank finance? If a cash flow forecast (an example of prospective financial information), the report would provide only negative assurance and an opinion would only be give on its proper preparation (on the basis of assumptions that are management’s responsibility).
2. It doesn’t create a self-review threat because the director’s personal tax liabilities are not relevant to the company’s financial statements.. It does however create potential threats of familiarity, intimidation and advocacy. I would suggest that it could not be done by a member of the audit team.
3. Regardless of the fraud, even though the audit assistant’s seniority is quite low, his employer should be made aware, before he takes part in the audit, that he has a family member in this audit client (e.g. the firm may require all employees to declare annually their interests and clients in all audit clients). If he is then assigned to the audit, he should not be involved in auditing the areas in which his brother is involved (or, if this wasn’t practical because it’s only a small firm/client/audit team – his work should reviewed
by the audit manager). If the client has an audit committee, I think that in the interests of transparency, the firm should make sure the client is aware that a member of the audit team is a family member of an employee – this year’s audit assistant might be next year’s audit senior …
4. As the financial institution is likely to be regulated, the auditor would no doubt have a legal responsibility to report this, however immaterial. The “new” NOCLAR pronouncement goes beyond a requirement to disclose to a relevant authority and provides guidance on how the auditor should act IN THE PUBLIC INTEREST on matters of non-compliance (which includes fraud/theft).
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