Question

Ali Partners are famous audit firm in Muscat. They have many clients both in Oman and UAE. Last month they signed an engagement letter with a client based in UAE. The client is a large-scale manufacturing company spanning its operation across middle east. Ali partners sent a team of 25 auditors consisting of one audit manager, 3 audit leads 5 subject expert and remaining all audit assistant. After a week of audit, audit team realised that the team strength is insufficient to handle such a big client, they requested the headquarters to send some more people to the client premises.

Since there is a complete lock down across the world due to COVID 19, Ali partners could not sent the additional team to UAE. The head office of Ali partners requested the client management to depute some employees of the company to overcome the shortage, they sent 5 of their senior members to join the audit team. Ali Partners are having comfortable level of staff now to complete the audit work. After two weeks of audit work, the audit lead realised that the general manager in charge of finance of the company is one of his cousin Mr. Mazin and they studied together in schools and college. The general manager assisted the audit team to get all material evidence they required throughout the audit process. In some area of audit, Mr. Mazin assured to the team that there will not be any mistake or error. The team believed this and proceeded to the other risky areas of financial statements.

The audit manager realised that the team members are not able to find any errors or frauds even after third week of audit. When he observed the work of the team, he realised that they are casually checking the books of accounts and evidences. The team only listen to the response to inquiries but did not do any cross checking. Once Mr. Ali asked his team members to evaluate one of the management estimate, the team came up with different argument. They cannot take a call on which one is correct and which one is wrong. He would like to give a refresher training to the team to increase overall effectiveness of audit.

You are required: -

1. Do you find any ethical issues in the above cases? Give reason for your answer.​  

2. What do you think the important qualities of an auditor this team doesn’t possess to identify errors and frauds.?   ​​​​​​​​​​​

Answer 1

1) Ethical Issues

a, The first and foremost responsibility of auditors is to check the financials that the management have made and make sure that there is no fraud or error involved. This is done my checking in depth into some material areas, and if any discrepancies is found , then auditors should clarify it with the management. Here in this case the audit team of management did not cross checked any of the files and they relay on the managerial person's opinion. Believing what the company is saying is not a good traits of auditor.

b. The Auditing is considered to be an independent verification of books. So if any internal employees or top managerial persons of the company are involved in the process, the independence of the auditors will be a question mark, so as the independence of the audit report.

c, Incapable audit team is also a disadvantage for the conduct of audit. Ali partners should provide a training program to the audit team before they entering into the clients premises.

2) Qualities of an Auditor

a - Good communication skill

b - In depth subject knowledge

c - Independence

d - Problem solving ability

e - Leadership

f - Personal Qualities (such as judgement, patience,firmness, good temper,tact )