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Hello Sir!
The external auditors job is to express an opinion on the financial statements.
But while solving some past questions of F8 i noticed something which is not related to the opinion on financial statements but rather constitutes a business advice.For example here why the external auditor is concerned about losing the suppliers goodwill?Fox has a policy of delaying payments
to their suppliers for as long as
possible(deficiency)Whilst this maximises Fox’s bank
balance, there is the risk that Fox is
missing out on early settlement
discounts. Also, this can lead to a loss
of supplier goodwill as well as the risk
that suppliers may refuse to supply
goods to Fox. (implication)
Fox should undertake cash flow
forecasting/budgeting to maximise bank
balances. The policy of delaying
payment should be reviewed, and
suppliers should be paid in a systematic
way, such that supplier goodwill is not
lost.(recommendation)Yes. The prime objective is to report on the FS. However, accountants also advise clients about poor internal controls like not safeguarding inventory or not performing credit checks on new customers. So, advising on how to safeguard assets, like supplier goodwill, is normal.
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