a) Explain five basic principles that govern the auditor's professional responsibilities and which should be complied with whenever an audit is carried out. b) In the context...

      

a) Explain five basic principles that govern the auditor's professional responsibilities and
which should be complied with whenever an audit is carried out.
b) In the context of developments in the audit approach over the years, .distinguish -between
"early audits" and "modern audits".
c) Describe three parties who benefit from using audited accounts.

  

Answers


Kavungya
(a). Basic principles that govern an audit.-
- Integrity - An auditor should be straight forward, honest and sincere in his approach to
his professional work.
- Professional independence/ objectivity - An auditor should be, and be seen to be, free
in each assignment he undertakes of any interest which might detract from objectivity.
- Confidentiality - Information acquired in the course of the audit should not be disclosed
unless where consent has been obtained from the client, employer or other proper source.
- Technical standards- An auditor has a duty to carry out his professional work with care
and skills and in conformity with profession.
- Professional competence - An auditor has a duty to maintain a high level of professional
competence throughout his career.
- Fees - Fees should not be charged on a percentage or similar basis, except where that
course is authorised by statute.
- Client's monies - A member in practice is strictly accountable for all clients' monies
received by him:

(b) Difference between early audits and modern audits,
- In modern audits the auditor is supposed to prove the true and fair view of the company's
state of affairs; whereas; in early audits the auditor was supposed to prove the true and
correct view of the state of affairs.
- The main object of modern audits is true and fair view whereas the main object in early
audits was detection of errors and frauds.
- In modern audits, the auditor owes a duty of care not only to his clients but also to other
parties, on the other hand the auditor owed no duty to third parties except those whom
he had contractual relationships.
- Early audits all transactions were checked while modern sampling is adopted

(c) Parties who benefit from audited accounts;-
- Creditors - These use audited accounts to ascertain the company's ability to meet their
short term obligations.
- Bankers - These use audited accounts to ascertain whether a company can settle theirshort
term obligations such as loans and overdrafts.
- Customers/debtors - These have an interest in the company in so far as goods and
services are provided. Their interest is the long term survival of the company to ascertain
whether the company can fulfill their long term interests.
- The government - The government and to some extent the public are interested in audited
accounts to ascertain the tax liability and company's ability to provide goods.
- Potential investors
- Employees
- Insurance companies
- Shareholders
Kavungya answered the question on May 14, 2019 at 11:59


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