In: Accounting
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?
What standards were violated and why?
Is there a violation of the elements of audit quality control, briefly discuss?
I | 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. | ||||||||||||||
II | 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 | ||||||||||||||