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Tutorial 1 - 2021 Summer

This document contains tutorial questions for an Auditing I course. It asks students to: 1) Explain three limitations of auditing in 3 sentences. 2) Identify ethical threats and how to reduce them for two audit client situations. 3) Determine if a code of ethics was violated when an audit firm quoted a lower fee to remain competitive for a client. 4) Identify threats to independence for four risks in an audit of a public interest entity. 5) State who is considered "closely connected" according to the auditor code. 6) Analyze the ethics of an auditor's planned course of action for a billing dispute and suggest alternatives.

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Priscella Llewellyn
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37 views2 pages

Tutorial 1 - 2021 Summer

This document contains tutorial questions for an Auditing I course. It asks students to: 1) Explain three limitations of auditing in 3 sentences. 2) Identify ethical threats and how to reduce them for two audit client situations. 3) Determine if a code of ethics was violated when an audit firm quoted a lower fee to remain competitive for a client. 4) Identify threats to independence for four risks in an audit of a public interest entity. 5) State who is considered "closely connected" according to the auditor code. 6) Analyze the ethics of an auditor's planned course of action for a billing dispute and suggest alternatives.

Uploaded by

Priscella Llewellyn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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University of the West Indies, Mona

Department of Management Studies


AACT3043 – Auditing I – Semester I

TUTORIAL QUESTIONS 1

1. Explain THREE limitations of Auditing? (3 marks)


2. You are an audit manager of Checker and Associates. The following situations have arisen
with different clients of your firm:
i. In an initial meeting with the finance director of Westine Ltd, an audit client, you learn
that the entire audit team will be invited to the company’s annual summer social event, a
weekend at an exclusive spa hotel.

ii. Mrs Waker has been the Engagement Partner for a client, Stewart Ltd, for nine years. He
has excellent knowledge of the client and knows all the directors of Stewart very well.
Stewart is listed on the Jamaica Stock Exchange.

Required: (4 marks)
a) Explain the ethical threats which may affect the independence of Checkers in respect of
each of the client audits.
b) For each threat explain how it may be reduced.

3. For the situation below (1) decide whether the ICAJ Code of Ethics has been violated or not
and (2) briefly explain how the situation violates or does not violate the Code. (2 marks)

i. Audit Firm Low found out that Audit Firm High is interested in being the auditor for
one of its client. For the upcoming 2017 audit, Audit Firm Low quotes a lower fee
than was charged for the audit last year to remain competitive.

Violation? Yes No

Explanation:

4. You are an audit manager of Peach & Herb audit firm. You have recently been assigned the
audit of Diamond Ltd (Diamond), a public interest entity. Your audit associate has
highlighted some of the potential risks to independence in respect of the audit as follows:
i. The audit engagement partner’s daughter works for Diamond.
ii. Audit fees from Diamond is significant to Peach & Herb.
iii. Overdue fee exists.
iv. Peaches and Herb has been asked to provide accountancy services.
Required: (4 marks)
For each of the above risks identify the correct threat(s) to independence to which each
relates.

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University of the West Indies, Mona
Department of Management Studies
AACT3043 – Auditing I – Semester I

TUTORIAL QUESTIONS 1

5. Section 9.22 of the ICAJ Code states that Family relationships which always pose an
unacceptable threat to independence are those in which an officer or senior employee of an
audit client is closely connected to a member in public practice or an employee engaged on
the assignment. Who is said to be closely connected to an auditor? (2 marks)
6. Read the scenario and answer the requirements below:

Required

a) Given the firm did not have any problem paying the higher bill, would Nathan's
planned course of action be ethical? Why or why not?
b) What other course of action might be available to Nathan? Which do you think would
be the best course of action for him to take?

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