Workshop 1: What do they do 81 can I audit them? Background information Professional and Ethical Standard, (PES) 1, requires that professional accountants have the competence to undertake an audit. ISA (NZ) 315 outlines procedures that auditors must follow in gaining an understanding of a business. Assume that you are a manager in an auditing firm in New Zealand and your firm has been approached by the Board of Katlnnandn Holdings Ltd to carry out their audit for the year ended 31 July 2017. You have been asked by one of the audit partners in your firm, who is considering whether to propose for the audit engagement, to gather some information about Kathmandu. There are a number of sources that you can access for research in preparing information for the audit partners. For example the website: http:ffwwwkathmanduholdingsxomf, would be a good place to start in doing your research. Questions to be addressed by those presenting and for those not presenting, in your bullet- point summaries, are: a. What are the business activities of Kathmandu Holding Ltd that you will need to understand to carry out a successful audit? Using information you obtained about Kathmandu, and the industry they are in, come to an informed view as to the 'business' and 'industry' risk for this prospective client. Be sure to set out the basis (reasons) for your decision. b. Evaluate ethical issues that could potentially arise from performing a statutory audit on these financial statements. How should those issues be addressed? Refer to the Professional Code of Ethics as appropriate. Keep in mind the public ownership of Kathmandu, the role of the Financial Markets Authority (FMA), and legislation. c. What are the key accounting issues from your review of other sections in the annual reports and financial statements, including the accounting policies? Based on your understanding of the business and the accounting issues, what specialist skills and competencies will you need to carry out the audit? d. Identify \"specific parties\" who may rely on the work of the auditor andi'or audit firm. Also identify what remedies are available to those \"specific parties\" should they be dissatisfied with the standard of the audit work. Describe some conditions (with reference to existing legal precedent) in which they might be successful in any action taken