Halifax Investment Services Pty Ltd was an Australian financial services provider that was placed in administration in November 2018. It entered liquidation in March 2019. 

EC Audit Pty Ltd was responsible for auditing the financial statements of Halifax Investment Services Pty Ltd for the financial years ended 30 June 2016, 30 June 2017 and 30 June 2018.

On 6 July 2021, EC Audit Pty Ltd entered pleas of guilty to three charges relating to alleged failure to conduct audits in accordance with auditing standards.

https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-218mr-halifax-auditor-convicted-and-fined-for-audit-breaches/

Required:

 

In relation to the audit of Halifax, discuss EC Audit:

• and the issue of negligence  (3 marks)
• and if there is any duty of care to a third party (1 mark)

Include reference to specific audit standards and relevant case law.

 

Question 2 - Business and Audit Risk (6 marks)

Country-Wide Bank (CWB) provides a variety of traditional banking and finance products and services.   Over 80% of its customers are in agricultural related businesses including small family-owned farms, that have a diverse range of agriculture products for regional sale, and large corporate owned farming industries exporting products such as livestock and wheat.

Due to agriculture industry supply chain issues broadly affecting CWB's customer cashflows, the senior bank management have recently decided to relax credit terms. This involved increasing the number of days for customers to make loan repayments from 30 days to 90 days and increasing available credit limits.

 

Loan accounts are recorded in a customer relationship management (CRM) system that produces daily reporting for CWB lending managers to review (including customer accounts that exceed credit limits; and overdue loan repayments). The CWB lending managers have been having problems with the CRM because it has reached the maximum number of customer accounts. Senior management have approved an upgrade to a new system. In the meantime, CWB staff are relying on extensive manual records.

 

You have been engaged as the external auditor of ABC Bank.

 

Required:

With reference to relevant audit standards, outline three (3) business risks CWB is facing, the related assertion and potential audit risk that may require further investigation.

 

Business Risk	Assertion	Audit Risk

Answer rating: 100% (QA)

Question 1 EC Audit and Negligence Issue of Negligence In the case of EC Audits involvement with Halifax Investment Services Pty Ltd negligence refers to the failure of EC Audit to conduct audits in a... View the full answer