PROGRAMME: BACHELOR OF COMMERCE IN ACCOUNTING

MODULE:

AUDITING $3$

Total Marks:

$100$

QUESTION ONE

Before your firm accepts any additional ongoing engagement, for example new audits, the

partners meet to decide on whether the engagement should be accepted. The firm is mindful of

the requirements to conduct preliminary engagement activities including compliance with ISA

$220-$ Quality management for an audit of financial information. The following prospective audit

clients are being evaluated. Your firm has seven partners and a diverse portfolio of clients ranging

form small business entities to medium$-$sized companies. None of its existing audit clients is a

listed company.

Apex $($Pty$)$Ltd a company which sells equipment to the mining industries, has approached

your firm with an offer that you take over the audit of the company. A significant amount

of additional non$-$audit work has also executive directors were recently alleged to have

been involved ii tender fraud, but nothing has been proved. They have both denied any

involvement. The current auditors have indicated their intentions not to make themselves

available for reappointment.

Calypso distributors Ltd$,$ a large fishing company in Durban, which was recently convicted

for exceeding its fishing quotas, and threatened with closure by the authorities should it

occurs again as this was not a first offence. Should your firm accept engagement, it will

be the third auditing firm to have been appointed in the last four years. The previous

auditors have resigned. The company is a public company but is not listed.

Impetus $($Pty$)$ Ltd$,$ a medium $-$sized company which is about to expend considerably

through a BB BEE dearly that involves a large, listed company. The listed company

requires that Impetus $($Pty$)$ Ltd be externally audited annually. Our firm has no experience

in the industry in which Impetus $($Pty$)$ Ltd be and the listed company operate.

Appollo $($Pty$)$ Ltd$,$ a small company which is owned by Frank Ngabo, the father of one of

your firm's partners. Frank Ngabo believes that having the company audited externally

adds to its credibility when negotiating with prospective business patterns.