A. Majdi has a degree in accounting from BZU and works for a local accounting office....

A. Majdi has a degree in accounting from BZU and works for a local accounting office. He was asked by a friend to prepare Financial statements for a small company in Ramallah. To help his friend Majdi prepared the financial statements and a report indicating that the financial statements were audited by him. What standards were violated and why? Is there a violation of the elements of audit quality control, briefly discuss?

Mira A Certified Public Auditor licensed in Palestine is the partner in charge of Ooredoo audit. In order to save cost, she hired a group of students from Al-Najah University to help her conduct the audit. A month later Mira received the audited financial statements and the report from the students. She signed it and send it to the board of directors of Ooredoo.

What standards were violated and why?

Is there a violation of the elements of audit quality control, briefly discuss?

Solutions

Expert Solution

It violates the standards of independence, integrity and objectivity which are the elements of audit quality control

It says that The personal must be free from any obligations and interest to clients

It also violates the international standards of GAAP and IFRS which makes external audits compulsory

(if the company falls under the purview of the international standards).

Objectivity cannot be ensured if same person prepares and audit financial statements

Integrity can also be compromised as the person will be biased towards his own work and his pre-conceived notions can prevent him

from giving clear and unbiased audit judgements.

There is violation of Independence, integrity and objectivity -

The auditor must have adequate technical training and proficiency to perform the audit.

Integrity requires personnel to be honest and maintain client Confidentiality.

Here Mira hired a group of students who are not expertise in audit and also disclosing confidentaility

Objectivity is a state of mind and a quality that lends value to a firm's services.

The principle of objectivity imposes the obligation to be impartial, intellectually

honest, and free of conflicts of interest.

Independence encompasses an impartiality that recognizes an obligation for fairness

not only to management and owners of a business but also to those who may otherwise

use the firm's report.

Here mira is not independent as there is no obligation of fairness towards management.

She simply signs the audit report and send to management

ekkarill92 answered 1 year ago

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