5. Ms. Kee, the engagement partner of Best Hospitality Limited’s audit team did not perform the necessary communication with those charged with governance over some critical issues identified during the course of the audit. Moreover, when management identified that the engagement partner has not communicated to those charged with governance of the Best Hospitality Limited, they also chose not to communicate. Upon identification of this issue, the personnel charged with governance inquired with management and auditors as to why there was no communication of the critical matters to them.
Upon such inquiry, Engagement Partner contended that it was the responsibility of Management to communicate first, then only the audit team should communicate. However, Management was of the view that they are not liable to communicate to those charged with governance. As an Engagement Quality Control Reviewer, what will be your opinion?
a. The auditor is responsible for communicating matters required by SA 260 to those charged with governance. Also, management has a responsibility to communicate matters of governance interest to those charged with governance. Communication by the auditor does not relieve management of its responsibility.
b. SAs are not applicable to the management and hence the management was not responsible for communicating the same to those charged with governance. Also, as per SA 260, Auditor can only communicate when management has already informed those charged with governance about the matters. Auditors cannot communicate first without management’s communication.
c. Communication by management with those charged with governance of matters that the auditor is required to communicate does relieve the auditor of the responsibility to also communicate them if the management has already communicated. Hence, in the current case Management should have communicated as it was their responsibility.
d. SA 260 requires the auditor to perform procedures specifically to identify any other matters to communicate with those charged with governance which includes matters already communicated by the management of non-material nature. Hence, it was the responsibility of the Auditor to communicate.
Upon such inquiry, Engagement Partner contended that it was the responsibility of Management to communicate first, then only the audit team should communicate. However, Management was of the view that they are not liable to communicate to those charged with governance. As an Engagement Quality Control Reviewer, what will be your opinion?
a. The auditor is responsible for communicating matters required by SA 260 to those charged with governance. Also, management has a responsibility to communicate matters of governance interest to those charged with governance. Communication by the auditor does not relieve management of its responsibility.
b. SAs are not applicable to the management and hence the management was not responsible for communicating the same to those charged with governance. Also, as per SA 260, Auditor can only communicate when management has already informed those charged with governance about the matters. Auditors cannot communicate first without management’s communication.
c. Communication by management with those charged with governance of matters that the auditor is required to communicate does relieve the auditor of the responsibility to also communicate them if the management has already communicated. Hence, in the current case Management should have communicated as it was their responsibility.
d. SA 260 requires the auditor to perform procedures specifically to identify any other matters to communicate with those charged with governance which includes matters already communicated by the management of non-material nature. Hence, it was the responsibility of the Auditor to communicate.
6. What’s last date to communicate significant deficiencies in Internal Control for audit of Listed Entities?
7. What’s last date to communicate significant deficiencies in Internal Control for audit of Entities other than Listed Entities?
8. X, Y and Z are joint auditors of a company engaged in manufacturing of chemicals. They have developed a joint audit plan and identified common areas. Besides, they have also identified and allocated work by signing work allocation documents among themselves. Verification of trade receivables was allocated to Z. Which of the following statements is in accordance with relevant SA in this regard?
a. X and Y should necessarily review work performed by Z to ascertain whether work has been actually performed in accordance with Standards on Auditing.
b. X and Y should perform tests to ascertain whether work has been actually performed in accordance with Standards on Auditing.
c. X and Y are entitled to assume that Z has actually performed work in accordance with Standards on Auditing.
d. X and Y are not entitled to assume that Z shall bring to their notice significant observations relevant to responsibilities noticed during the course of the audit.
a. X and Y should necessarily review work performed by Z to ascertain whether work has been actually performed in accordance with Standards on Auditing.
b. X and Y should perform tests to ascertain whether work has been actually performed in accordance with Standards on Auditing.
c. X and Y are entitled to assume that Z has actually performed work in accordance with Standards on Auditing.
d. X and Y are not entitled to assume that Z shall bring to their notice significant observations relevant to responsibilities noticed during the course of the audit.
9. Four audit firms viz. GPR & Co., MKS & Co., CY & Associates and DES & Associates have been appointed for conducting statutory audit of KNB Bank, a public sector bank in accordance with regulatory guidelines.
The professional work was divided by audit firms on the basis of zones of bank. However, work relating to “IT Systems and controls” was not allocated by them due to its very nature. While planning for the above common work area, it was decided to test IT general controls, application controls and IT dependent manual controls.
Planned key audit procedures relating to this common area also included testing design and operating effectiveness of controls over “computer operations including back-up, batch-processing and data centre security”.
The actual audit procedures pertaining to “testing controls over batch processing” were performed by team of DES & Associates.
In case work in relation to above audit procedures is not performed professionally by DES & Associates, discuss where responsibility for such lapses would lie in line with SA 299?
The professional work was divided by audit firms on the basis of zones of bank. However, work relating to “IT Systems and controls” was not allocated by them due to its very nature. While planning for the above common work area, it was decided to test IT general controls, application controls and IT dependent manual controls.
Planned key audit procedures relating to this common area also included testing design and operating effectiveness of controls over “computer operations including back-up, batch-processing and data centre security”.
The actual audit procedures pertaining to “testing controls over batch processing” were performed by team of DES & Associates.
In case work in relation to above audit procedures is not performed professionally by DES & Associates, discuss where responsibility for such lapses would lie in line with SA 299?
Remember:
In respect of common areas, the joint auditors are only responsible for appropriateness of nature, timing and extent of planned audit procedures agreed among them. The responsibility of individual execution lies with concerned joint auditor.
In respect of common areas, the joint auditors are only responsible for appropriateness of nature, timing and extent of planned audit procedures agreed among them. The responsibility of individual execution lies with concerned joint auditor.
10. Which of the following is incorrect.
If there are 3 joint auditors.
They shall have:
1. Common engagement letter.
2. 3 engagement letters.
3. Common written representation.
4. Generally Issue a common report.
5. For disagreement issue separate reports with EOM Para referencing other auditors report.
If there are 3 joint auditors.
They shall have:
1. Common engagement letter.
2. 3 engagement letters.
3. Common written representation.
4. Generally Issue a common report.
5. For disagreement issue separate reports with EOM Para referencing other auditors report.
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Thank you so much everyone for participating.
Hope you enjoyed MCQ Party 😃🎉
Hope you enjoyed MCQ Party 😃🎉
Tomorrow’s Target:
SA 500-510 & 620 ✅
Keep this streak of everyday audit going on!
SA 500-510 & 620 ✅
Keep this streak of everyday audit going on!