Question

Caterham PLC distributes sports equipment for sale to a number of ‘High Street’ chains, importing branded goods from China and India. The company has several distribution and delivery hubs throughout the UK, and floated on the LSE in 2001. As the business has grown, Directors have become concerned that systems of internal financial control and internal audit have not kept pace with their growing product range and increasingly complex management structure, which includes the increasing use of delegated budgets and greater reliance upon distribution centre based target setting, monitoring and reporting.

The Company appointed Helpe Watson (Chartered Accountants) as external auditors in 2002, with Claire Jackson as reporting auditor. In 2003 and 209, Helpe Watson were employed to complete additional work on behalf of the company, advising on the development of internal audit systems and acting as advisors corporate taxation. In addition, Claire Jackson is retained by the Managing Director of the company as a personal tax and financial adviser.

The Financial Statements of the company are produced to a year-end of 31^st December. All audit reports issued since 20014 have been unqualified. Company turnover in 2019 was £16.5 million, with profit after tax of £6 million.

1. With reference to current IAS and IFRS, outline the duties of the Statutory Auditor in relation to reporting to stakeholders.

2. Produce an outline external audit plan for this company’s annual audit and explain each stage of the audit planning and preparation process, with reference to current auditing standards.

3. Identify three areas of potential ‘audit focus’ and suggest how a statutory auditor could analyse, evaluate and test the figures provided on the financial statements of the company.

4. With reference to the 2015 EU auditing directive and existing IASB provisions, discuss the potential issues relating to the re-appointment of Helpe Watson in the light of compliance with current auditing regulation and ethical standards.

Answer 1

A statutory auditor is the person who has been given a right to audit the books of accounts/financial statements of company. The auditor verifies the numbers presented in the financial statements and gives his judgement whether the numbers represent true and fair view of the business. If he finds any fraud, he gives an inverse or disclaimer of opinion.Every auditor performing the audit service shall provide an assurance by expressing opinion. To express auditor will perform the following steps

1. To audit the business, auditor requires understand of the Organization and it's environment.
2. Further auditor performs risk assessment procedures to assess the risk of material mistatment at Assertion level.
3. Understand the internal controls and it's efficiency
4. auditor based on the risk taken and efficiency of internal controls plan the audit
5. Performs Audit procedures and obtain audit evidence to draw conclusion
6. Express an Audit opinion by giving audit report.