AHMADU BELLO UNIVERSITY, ZARIA

Affiliated Federal College of Education, Kano

SCHOOL OF VOCATIONAL EDUCATION

DEPARTMENT OF BUSINESS EDUCATION

COURSE CODE: VTEB 418

AUDITING AND INVESTIGATION

GROUP 2

Question

3. a) Audit work for any financial year is carried out at various times (during, at the
end and after the end of the year). State three factors that the timing of audit work is
dependence on

3b) explain the following fundamental ethical principles that apply to Auditors

Integrity
Objectivity
Confidentiality competence
Professional behaviour
4. a) The ability of auditors to comply with general ethical principles can be threatened
by various factors. Here are five common sources of threats to auditors' ability to
uphold ethical principles in their work:

4 b) Auditors must have full dependent in carrying out their work. explain five
factors that , may threaten or may appear to threaten, the independence of auditor

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Introduction

Auditing is a systematic and independent examination of financial records, statements, and

other relevant information to determine the accuracy, reliability, and fairness of an
organization's financial statements. It is a critical function in business that provides
assurance to stakeholders and enhances the credibility and transparency of financial
information. Auditors follow a structured approach, apply professional judgment, and
adhere to professional standards to evaluate internal controls, gather evidence, and
express an independent opinion on the fairness of financial statements.

Investigation, on the other hand, refers to the process of gathering evidence and conducting
inquiries to uncover facts and resolve specific issues or concerns. While auditing primarily
focuses on financial statements, investigations are broader in scope and can involve
various aspects such as fraud, misconduct, regulatory non-compliance, or other allegations.
Investigations require specialized skills and techniques to collect and analyze evidence,
interview relevant individuals, and document findings. They aim to uncover the truth,
determine accountability, and support decision-making in resolving issues.

Q1a)

The timing of audit work is dependent on several factors. Here are three key factors that
influence the timing of audit work:

1. Business Operations and Cycles: The timing of audit work is often influenced by the
business operations and cycles of the audited entity. Certain industries or
businesses may have peak seasons or busy periods that affect their financial
activities. For example, retail companies might experience increased activity during
holiday seasons. The audit may need to be scheduled after the completion of these
busy periods to ensure that the financial statements reflect the relevant
transactions and events accurately.
2. Availability of Information: The availability of relevant financial information is
crucial for conducting an audit effectively. The audit timing may depend on when
the audited entity can provide complete and accurate financial records, supporting
documents, and other necessary information. This may be influenced by internal

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 factors such as the efficiency of the company's accounting and reporting systems or
external factors such as the availability of third-party data required for the audit.
3. Reporting Deadlines and Regulatory Requirements: Audit work is often driven by
reporting deadlines and regulatory requirements. Companies are typically required
to publish their financial statements within specific timeframes, and audits must be
completed before these deadlines. Additionally, regulatory bodies and stock
exchanges may have their own reporting requirements that influence the timing of
the audit. Adhering to these deadlines is crucial to ensure compliance and maintain
transparency in financial reporting. It is important to note that these factors can
vary depending on the specific circumstances of each audit engagement. The
auditor needs to assess and consider these factors while developing an appropriate
audit plan and schedule for each client.

1b)

Fundamental ethical principles that apply to auditors include integrity, objectivity,

confidentiality, competence, and professional behavior. Here's an explanation of each
principle:

1. Integrity: Integrity refers to the quality of being honest, truthful, and having strong
moral principles. Auditors must act with integrity by being straightforward, honest,
and transparent in their professional activities. They should be free from conflicts of
interest and refrain from engaging in any unethical or fraudulent behavior.
2. Objectivity: Objectivity means that auditors must approach their work without bias
or undue influence. They should maintain an unbiased mindset and avoid any
conflicts of interest that could compromise their independence. Objectivity ensures
that auditors provide fair and impartial judgments, opinions, and recommendations
based on the evidence and facts they gather during the audit process.
3. Confidentiality: Confidentiality is the principle that auditors must respect and
protect the confidential information they come across during their work. Auditors
have access to sensitive financial and operational data of the audited entity, and it is
crucial for them to maintain strict confidentiality. They should not disclose or use

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 any confidential information for personal gain or unauthorized purposes unless
required by law or with the permission of the client.
4. Competence: Competence refers to the professional knowledge, skills, and expertise
that auditors are expected to possess. Auditors should have the necessary
qualifications, experience, and training to perform their duties effectively. They
must stay updated with relevant professional standards, regulations, and
developments in their field to ensure they can provide competent and high-quality
audit services.
5. Professional behavior: Professional behavior encompasses the ethical conduct and
demeanor expected from auditors. It involves acting in a manner that upholds the
reputation and trustworthiness of the auditing profession. Auditors should
demonstrate professionalism, respect, and courtesy in their interactions with
clients, colleagues, and other stakeholders. They should also comply with applicable
laws, regulations, and professional standards governing their practice.
These ethical principles provide a framework for auditors to maintain their
professionalism, independence, and reliability while fulfilling their responsibilities
to the public, clients, and the profession as a whole.

2a)

The ability of auditors to comply with general ethical principles can be threatened by
various factors. Here are five common sources of threats to auditors' ability to uphold
ethical principles in their work:

1. Self-interest threat: This occurs when auditors have a personal or financial interest
that could potentially influence their judgment or objectivity. For example, if an
auditor has a financial stake in the client's success, they may face a conflict of
interest that compromises their ability to provide an unbiased opinion.
2. Self-review threat: This arises when auditors are asked to evaluate their own work
or decisions made by themselves or their firm. When auditors review their own
work, there is a risk that they may overlook errors, misinterpretations, or potential
biases, leading to a lack of objectivity and a compromised audit quality.

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 3. Advocacy threat: Advocacy threat emerges when auditors promote the interests of
their clients or take a position that compromises their objectivity and independence.
Auditors should maintain an independent and impartial stance rather than
becoming advocates for their clients' interests, as it may compromise their ability to
provide unbiased opinions.
4. Familiarity threat: This occurs when auditors develop close relationships with
clients that could impair their objectivity and professional skepticism. Over time,
familiarity may lead to a level of trust that affects the auditor's ability to critically
evaluate and challenge the client's assertions or financial statements.
5. Intimidation threat: Intimidation threat arises when auditors feel pressured or
threatened by the client or other parties, which could compromise their ability to
exercise professional judgment and adhere to ethical principles. Intimidation can
come in various forms, such as explicit threats, excessive influence, or fear of losing
future business opportunities.
It is important for auditors and their firms to identify and address these
threats proactively. They should establish robust ethical frameworks, implement
strong internal controls, and provide training and guidance to auditors to help them
recognize and mitigate these threats. Additionally, regulatory bodies and
professional organizations play a significant role in setting ethical standards,
providing guidance, and monitoring compliance to ensure auditors adhere to the
highest ethical principles in their work.

2b

Auditors must have full independence in carrying out their work. However, there are
several factors that can threaten or create the appearance of threatening their
independence. Here are five such factors:

1. Financial Relationships: Auditors may have financial relationships with their clients
that can create a threat to independence. This can include owning shares in the client's
company, having a financial interest in the client's success, or having a loan or other
financial arrangements with the client. Such relationships can compromise the auditor's
objectivity and independence.

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2. Non-Audit Services: When auditors provide non-audit services to their audit clients, it
can create a threat to independence. This occurs when auditors are involved in
activities such as bookkeeping, financial system design, or internal audit for the same
client they are auditing. Providing these services can create a conflict of interest and
compromise the auditor's independence.
3. Familiarity and Long-Term Relationships: Long-term relationships and excessive
familiarity between auditors and clients can create a threat to independence. If auditors
have a long history of working with a client, it can lead to complacency or a lack of
objectivity. Auditors may become too sympathetic to management's positions or
overlook potential issues that should be addressed.
4. Pressure and Intimidation: Auditors may face pressure or intimidation from clients or
other stakeholders, which can threaten their independence. This pressure can come
from management's attempts to unduly influence audit procedures or reporting, or
from threats of legal action or termination of the engagement. Auditors need to resist
such pressures and maintain their independence and objectivity.
5. Self-Interest and Advocacy: Auditors must guard against their own self-interest and
avoid becoming advocates for their clients. When auditors have a personal or financial
interest in the client's success, it can compromise their ability to provide an unbiased
opinion. Auditors should always prioritize their professional judgment and integrity
over any personal or financial interests.

These factors can significantly threaten the independence of auditors or create the
appearance of threats, which can undermine public trust in the auditing profession. It is
essential for auditors and their firms to be aware of these factors, adopt appropriate
safeguards, and adhere to professional ethics and standards to maintain their
independence throughout the audit process. Regulatory bodies and professional
organizations also play a critical role in setting and enforcing independence requirements
to ensure the integrity and credibility of audit reports.

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Conclusion

In conclusion, auditing and investigation are two distinct but interconnected processes in
the realm of financial scrutiny and accountability. Auditing involves the independent
examination of financial statements to ensure accuracy, reliability, and fairness, providing
assurance to stakeholders and enhancing transparency. On the other hand, investigation is
a broader inquiry process that aims to uncover facts, resolve specific issues, and address
concerns such as fraud, misconduct, or regulatory non-compliance.

Both auditing and investigation require specialized knowledge, skills, and adherence to
professional standards. Auditors follow a systematic approach, conduct risk assessments,
gather evidence, and express an independent opinion on financial statements.
Investigations involve gathering evidence, conducting interviews, and analyzing data to
uncover the truth and determine accountability.

References:

Arens, A. A., Elder, R. J., Beasley, M. S., & Splettstoesser-Hogeterp, I. (2016). Auditing and
Assurance Services: An Integrated Approach. Pearson.

Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., & Thibodeau, J. C. (2020).
Auditing & Assurance Services. McGraw-Hill Education.

Lee, R. J., & Daugherty, B. E. (2017). Principles of Auditing: An Introduction to International

Standards on Auditing. Routledge.

Singleton, T. W., Singleton, A. J., Bologna, J. C., & Lindquist, R. J. (2019). Fraud Auditing and
Forensic Accounting. John Wiley & Sons. Albrecht, W. S.,

Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2018). Fraud Examination. Cengage
Learning.