Cheat Sheet Flashcards
For every question that has non-compliance insert this point especially if the person is an auditor
If a complaint is laid that an auditor has failed to exercise reasonable care and
skill in the performance of his/her duties s/he will be investigated, and if
considered to have acted improperly, will be subject to disciplinary action by
the IRBA’s Investigation or Disciplinary Committees.
Interesting if Financial statements don’t not meet on of the Ifrs here is a good point
Regarding adherence to accounting standards, legal backing has been
incorporated into the Companies Act, via section 29, which requires a company
to prepare its financial statements in accordance with the “financial reporting
standards”, which in the case of a public company is the International Financial
Reporting Standards as issued by the IASB. (1)
6.2.1 Those persons who prepare, approve and/or disseminate financial
statements without complying with this requirement will be guilty of an
offence (section 29(6) of the Companies Act).
view that Company would not really gain any benefit
from adopting the King IV Report principles
which brings into question
their commitment to good corporate governance as well as adopting an
ethical culture as suggested by King IV
also not encouraged a stakeholder inclusive
actions are good for self but not for others (e.g.
customers getting old parts, quality of audit possibly compromised.)
The provision of other services to an audit client may impair independence, particularly
where these are expected to result in a significant increase in the turnover of the firm.
Depending on the services to be provided, threats created include self-review, selfinterest and advocacy threats
Co-hosting a stand at the Annual African E-Commerce Expo may create a self-interest or
intimidation threat given the close business relationship. Unless the commercial
relationship is insignificant to the firm, there would be a significant threat, which could
not be reduced to an acceptable level by any safeguards
The new remuneration policy implemented by Nauru & Partners may create a self-interest
threat as audit team members are compensated for selling services to audit clients.
Lindi and Stephan have dinner together, this may create a threat to independence as it
could be seen that she is offered hospitality, resulting in a self-interest or familiarity
threat to objectivity.
It seem that Stephan asked for the appointment of Lindi as the engagement partner. This
may be construed as “interfering” with the assignment of the audit team, which will
threaten independence.
The executive directors have been awarded lucrative remuneration packages which may
question their integrity in the manner in which they run the company.
The Board of Directors have awarded the lucrative remuneration packages, but as the
executive directors are part of the Board, they may have influenced the structure of their
own remuneration packages to be beneficial for them.
The directors are contravening s93 of the Companies Act (not complying with legislation).
This is because the auditors of E-buy have the right to all financial data, at all times, in the
performance of their duties as auditors of E-buy
An audit committee has not been appointed, which is a requirement of the Companies Act
for public companies. The directors are thus failing to ensure compliance with the
Companies Act (legislation).
- Stephan cannot unilaterally appoint Nauru & Partners as the auditors of the company.
Rather, the Board should have appointed a new auditor after the resignation of the
previous auditor. The Board therefore does not comply with legislation. - This may also create the impression that the Board is controlled by a single director.
The directors have made an upfront cash payment to the new auditors for services to be
rendered. Auditors do not typically receive such payments upfront, particular where the
engagement letter has not yet been signed. This brings into question the directors’
integrity and may be considered to be bribery.
Stephan has requested Lindi not to contact the previous auditors, which brings into
question whether management is attempting to hide reasons why the engagement should
not be accepted.
Father was CEO and passed down to Father
The CEO may not be competent (he may have been appointed for nepotistic reasons), and
he does not understand the role of the auditors or the relevant legislation. This may
complicate the completion of the audit and add to the costs.
She places too much trust in the competence and experience of the accounting staff of Ebuy and as a result might not identify and consequently respond to instances of fraud and
error as a result of the lack of application of professional scepticism
The audit has a very tight deadline and will be rushed to comply with E-Buy management’s
requirement (the audited financial statements are required for possible investors in E-buy
before 31 March 2018). As a result the existence of instances of fraud and error might not
be detected and responded to appropriately and the team will not pick up errors.
The terms of the audit engagement, on the responsibility of management and the client (ISA
210), have not been set out an engagement letter. An engagement should not be accepted
where there is not a signed contract. This may indicate a lack of quality in that the team
commences the work without having established the terms of the engagement with the
client. It also indicates an apparent lack of compliance with quality processes by the
engagement partner
She has requested the audit team to not work longer than the budgeted hours to meet the
agreed audit fee:
