You are working at LBW, a large audit firm as the technical expert on legal matters relating
Question:
You are working at LBW, a large audit firm as the technical expert on legal matters relating to the performance of audits. The following unrelated incidents are referred to you so that you can provide appropriate advice to the parties concerned:
a) A threatening response from the general manager of Guptill Ltd, to a request from one of your audit staff: “No you may not look at our payroll records as they are confidential. Now go away and stop asking me questions or I will cut your audit fee in half … and if you continue to irritate me, I will personally fire LBW and replace them with immediate effect”.
Required: Explain what statutory provisions are designed to protect the auditor from the above response, indicating clearly whether they relate to the Financial Reporting Act or to the Companies Act. You are NOT required to state what section numbers apply. (6 marks)
b) William Kane is an entrepreneur who controls a number of companies. He has asked you to clarify some questions with regard to two of these companies: Southee Ltd - an FMC reporting entity; and Raval Ltd – a company with $15 million in assets; $7 million in annual revenue and 20 shareholders
c) A concern expressed by one of the partners of your firm regarding an audit client who has gone insolvent: “We could be sued for the entire loss if we are found to be negligent, even though the directors did not implement proper systems of internal controls.”
Required: For each of the above companies, indicate:
i. The period within which each must prepare financial statements?
ii. Whether they may opt out of statutory requirements to prepare financial statements?
iii. Whether they may opt out of statutory requirements to have their financial statements audited?
iv. Whether they must appoint a licenced auditor/registered audit firm?
Expert Answer:
A Statutory Provisions A statutory audit is an independent audit of the financial account of the company or institution The auditors role is to report on whether the financial statements issued by an ... View the full answer
