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a) Identify six benefits that would accrue to a partnership from having its financial statements audited. b) i)Explain the circumstances under which continuous audit would be desirable ii)...

a) Identify six benefits that would accrue to a partnership from having its financial statements
audited.
b) i)Explain the circumstances under which continuous audit would be desirable
ii) Highlight three advantages and three disadvantages of continuous audit

Answers

Kavungya
(a) The benefits of an audit to a partnership would include:
• Providing a convenient means of settling accounts between partners thus avoiding the
possibility of future disputes.
• The auditor may be able to make useful comments on the •firm's accounting and control
system, where necessary' making recommendations as to how areas of weakness can he
eliminated.
• The settlement and adjustment of accounts between partners on the occasion of any
change in the partnership structure will be facilitated where audited accounts arc
available.
• Where audited accounts are available, this will perhaps make them more readily
acceptable to the revenue authority when it comes to agreeing on individual partner's
liability to tax. The partners may well wish to take advantage of the auditor's review in
the additional role of tax advisor
• Credibility to the accounts is facilitated.
• The sale of the business or the negotiation of loan or overdraft facilities may well be
facilitated if the firm is able to produce properly prepared and audited accounts.
• An audit on behalf of a "sleeping" partner is highly advisable since generally such a
person will have little other means of checking he accounts of the business or
confirming the share of profits due to him.
• Detecting errors and frauds

(b) (i) Circumstance when continuous audit would be desirable
• When an entity is very large and run very complex systems the auditors may find that
they have to make several audit visits or have a continuous presence at the client's
premises carrying out audit work on the transactions as they occur. Such a situation
would he called a continuous audit.
• Continuous audit may also be necessary if there is a weak internal control system.
(ii) Advantages that would arise from a continuous audit include:
1. The continual or regular attendance of the auditor may act as a detriment againSt fraud.
2. Forms the basis to declare interim dividends.
3. Weaknesses in the client's systems and the related errors or irregularities are noticed
earlier and corrective action undertaken.
4. Understanding the clients business.-
5. It is sometimes possible to start balance sheet work before the year end. This will lead to
more timely reporting
6. The auditor's work is spread more evenly throughout the year. This will help to relieve
the pressure on staff that arises in many audit firms during the first months of the year.
Disadvantages include
1. Audit staff who spend much of their time working on one client may find their
independence adversely affected or their concentration diminished
2. It is costly and expensive.
3. The auditor's frequent (and sometimes unexpected) visits may cause inconvenience to the
client staff.
4. It is possible that figures may be altered (innocently or fraudulently) after they have been
audited it may be found that outstanding points and queries raised at one visit are
forgotten and not followed up at a later stage.
Kavungya answered the question on May 14, 2019 at 12:04

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