El-Rummy & Co (EL), a medium-sized audit and assurance firm, provides services to listed clients. EL's...

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El-Rummy & Co (EL), a medium-sized audit and assurance firm, provides services to listed clients. EL's two largest clients are Venice Bhd (Venice) and Rome Bhd (Rome) from which EL earns the following fee income: Annual external audit Annual tax services One-off engagements Total Venice RM 000 920 575 560 2,055 Rome RM 000 880 550 145 1,575 EL's total annual fee income, including fees from Venice and Rome, is RM16 million. EL's other clients generate a total annual fee income of less than RM1 million each. EL is currently completing the external audits of Venice's and Rome's financial statements. Venice's financial statements and auditor's report, for the year ended 31 July 2020, are due to be signed on 12 September 2020. However, audit procedures have identified a number of internal control issues relating to new accounting software implemented by Venice during the year. The engagement partner, Mr Abu Samah, has advised the directors of Venice that the auditor's report will not be signed before 30 September 2020, to allow time for additional audit procedures. Venice's directors have responded that the signing of the auditor's report cannot be delayed. This is because Venice is required to present its audited financial statements to its bank, on 13 September 2020, in support of a loan application. Venice's directors have stated that any delay will result in your firm not being reappointed as external auditor at Venice's next annual general meeting. Abu Samah was unaware that Venice's bank had requested the audited financial statements. The financial controller of Rome left the company suddenly during the course of the audit. The directors of Rome have offered the role of financial controller to the audit manager who has informed the engagement partner that he intends to accept the offer. Required: Identity and explain the significant matters arising, including any professional and ethical issues, in relation to the services provided to Venice and Rome. State any steps EL should take to address those matters. El-Rummy & Co (EL), a medium-sized audit and assurance firm, provides services to listed clients. EL's two largest clients are Venice Bhd (Venice) and Rome Bhd (Rome) from which EL earns the following fee income: Annual external audit Annual tax services One-off engagements Total Venice RM 000 920 575 560 2,055 Rome RM 000 880 550 145 1,575 EL's total annual fee income, including fees from Venice and Rome, is RM16 million. EL's other clients generate a total annual fee income of less than RM1 million each. EL is currently completing the external audits of Venice's and Rome's financial statements. Venice's financial statements and auditor's report, for the year ended 31 July 2020, are due to be signed on 12 September 2020. However, audit procedures have identified a number of internal control issues relating to new accounting software implemented by Venice during the year. The engagement partner, Mr Abu Samah, has advised the directors of Venice that the auditor's report will not be signed before 30 September 2020, to allow time for additional audit procedures. Venice's directors have responded that the signing of the auditor's report cannot be delayed. This is because Venice is required to present its audited financial statements to its bank, on 13 September 2020, in support of a loan application. Venice's directors have stated that any delay will result in your firm not being reappointed as external auditor at Venice's next annual general meeting. Abu Samah was unaware that Venice's bank had requested the audited financial statements. The financial controller of Rome left the company suddenly during the course of the audit. The directors of Rome have offered the role of financial controller to the audit manager who has informed the engagement partner that he intends to accept the offer. Required: Identity and explain the significant matters arising, including any professional and ethical issues, in relation to the services provided to Venice and Rome. State any steps EL should take to address those matters.

Answer rating: 100% (QA)

Significant matters arising for Venice Internal Control Issues The identification of internal control issues related to the new accounting software implemented by Venice is a significant matter This r... View the full answer