MIA By Law Case Study free essay sample

However, this situation shows indirectly violation of the MIA By Law as the audit firm can ask the other audit firm to undertake as if the firm does not have capacity or due to lack of staff results from other factors as well there is restrain that result to the firm cannot perform the audit. But in this case, the situation when Ariff has offered Aminurrashid a certain percentage of the audit fee and Aminurrashid accepted if even though Aminurrashid has reluctant to accept initially is violated MIA By Law under integrity as the principle of integrity requires a professional accountant to be sincere, honest and straight forward in his business relationship and professionals. Aminurrashid should not accept the money and Ariff should not offer the percentage of audit fee as this also will arise the conflict of interest or any threats later. The second situation shows the violation of the MIA By Law is when Ariff accepting the offer instantly without considering the man power that he has. This situation shows that Ariff has violated the professional competence and due care. This is because Ariff need to know either his firm has capability in performing the audit due diligence and due care to avoid the incompetent services which result to unreliable report as well as the audit report can be questioned. The third situation shows in this case is when Ariff spend most of his time in his other company, a construction company and he seldom come to his CA firm and would trust the Audit Seniors to lead the assignments and subsequently review the working papers. In fact, he only comes to his CA office if he needs to sign the independent Auditors Reports or having meeting with his potential and current clients. This violated MIA By Law of professional behavior as the CA has an obligation to act in a consistent manner with the good reputation of profession. However, in this case, Ariff ignore his responsibility in reviewing the audit assignment works by the Senior Auditors which he need to concern on the matter arise that will effect audit report. In fact, as mentioned earlier, the firms are not competent to undertake this client, thus Ariff should also focus on CA office to guide and review the senior auditors’ works as well as engagement performance to avoid the negligence in the performance that discreditable to the accounting professionals. Question 2 Indicate the elements of Quality Control at Engagement level which are not adhered by riff Al-Hakim Associates. (12 marks) When Ariff Al-Hakim Associates accept to undertake a financial statement audit of VCE Construction Work Sdn. Bhd. , the firm do not adhered one of the elements of Quality Control at engagement level which is acceptance and continuance of clients and audit engagements. In this case, the engagement partner should consider the independent and competency of the audit team, the integrity of the principal owners, management and those charged with governance of the entity. These factors, including any conflicts with the existing client, should also be taken into consideration in decisions relating to continuance of client relationship. Moreover, Ariff Al-Hakim Associates does not also obey the ethical requirement. The engagement partner should obtain sufficient information about the audit in order to evaluate whether there are any threats to independence and if they identifies breaches to independence policies or procedures, the partner should take appropriate action to address or eliminate such treats. However, in this case, Ariff as the engagement partner does not perform this element of Quality Control as he easily passed his responsibility to Senior Auditors and also do not communicate promptly to the firm’s actions to resolve the issue on independence and documented conclusion regarding such matter if any. Other than that, Ariff Al-Hakim Associates also does not adhere with the assignment of engagement team. In this element of quality control, the engagement partner should ensure that the audit is in accordance with professional standards and in line with the regulatory requirements. Quality control on assignment of audit team should ensure that the personnel of the audit team have the necessary technical training and proficiency required in the circumstances. However, in this case each team consist of one audit senior, one audit assistant and trainers which have small manpower and Ariff also ignore the technical training on the team, especially on trainees. In addition, Ariff Al-Hakim Associates also do not adhere with the engagement level that should be implemented in quality control. The engagement partner is responsible for the overall direction and performance of the audit engagement. Such responsibility covers not only risk assessment and audit planning but also the supervision. Before the audit report is issued, the engagement partner should review the audit documentation to ensure that sufficient appropriate audit evidence has been obtained to support audit opinion in the report. However, Arif Al-Hakim as a partner ignore his responsibility as he trust the audit senior to lead the assignments and subsequently review the working paper. Question 3 Discuss the type of audit report that Ariff Al-Hakim Associates should be issued to Deenurleez Weeding Planner Sdn. Bhd.? (6 marks) The type of audit report that riff Al-Hakim Associates should issue to Deenurliz Weeding Planner Sdn. Bhd. Is qualified audit report. In this case, there is a limitation on scope that leads to departure from unqualified auditor’s report. In this case, during the course o audit, Ariff faced problem in verifying the debtor’s outstanding balance as the accounting book of records are incomplete and unsystematic. In addition, the staff of Deenurliz Wedding Planner Sdn. Bhd. was not cooperative in helping the auditor solves the problems. Moreover, the auditor intention to send confirmation to debtors was mistakenly understood by the client and they prohibit the auditor from sending the confirmation to the debtors. Thus, we should issue a disclaimer audit report because of these limitations of scope on the audit. The auditor disclaims an opinion on the financial statements because the possible effect on the limitation of scope is so material and pervasive that the auditor has not been able to obtain sufficient and appropriate evidence to form an opinion on the overall financial statement. As in this case, the amount of debtor is considered as material and they affect other items in financial statement such as sales and cash account. Question 4 Briefly explain on the scope paragraph in the Independent’s Auditors Report. (4 marks) The auditor’s report is the main product or output of the audit. The audit report, also known as the audit opinion, is the culmination of a process of collecting and evaluating sufficient appropriate evidence concerning the true and fair view presentation of management’s assertions in the financial statements. The auditor’s report on financial statements provides authorititative guidance on the basic elements and forms of audit reports. The auditor’s report advices users whether the auditee’s financial statement have been prepared in accordance with stated set of accounting principle (GAAP), whether they are free from material misstatement. Thus, the report is an assurance whether the financial statement information presented by the auditee is materially trustworthy for making various decisions. However, under certain circumstances, it is not appropriate for the auditors to issue a clean opinion or an unqualified report. The two basic reasons an auditor may be unable to express an unqualified opinion are limitation of scope and disagreement between auditor’s view and management’s view. Hence, there will be three types of audit reports resulting from scope limitation or disagreement. There are qualified report, disclaimer report, and adverse report. If there is material effect on the financial statements, the auditor would conclude that the issue of an unqualified report is not appropriate.