Gradat Pvt. Ltd. Company is an owner-managed company. It has asked your firm to become its auditors. The following information has been obtained about the company, mainly from the company’s current auditors.

1. The current auditors have just resigned from the audit because they no longer have sufficient resources to carry out the audit work for Gradat Pvt. Ltd. They had taken on the audit two years earlier, after the previous auditors had resigned due to a dispute about fees. The current auditors commented that the company’s management liked to keep a close control over costs, and they had agreed to do the audit for a lower fee.

2. The current auditors had discovered a number of internal control weaknesses in Gradat Pvt. Ltd. and had reported them to management, but nothing appeared to have been done by management to improve the control system.

3. There were ongoing disputes with the tax authorities about the amount of tax payable by Gradat Pvt. Ltd. on profits for the previous three years.

4. Gradat Pvt. Ltd. Company has a poor public relations image. It is currently under investigation by both the police authorities and the regulatory authorities for alleged breaches of regulations, and some of these had been widely reported.

5. The company is ambitious and plans to expand its business in the next year or so. It expected to obtain bank loans to finance most of the expansion.

Required:

What issues should the audit firm consider when deciding whether or not to accept the new audit appointment?

Answer rating: 100% (QA)

As per ISA 210 agreed to the terms of an audit engagement If the management has imposed any of th... View the full answer