Question

In a conversation with the Production Manager of your company over lunch, you expressed how tight you are at the office, trying to produce 2016 financial statements free from material misstatements either due to fraud or errors. The Production Manager however said, “why worry, after all the auditors would come and look for such fraud and errors in the financial statements”. Required: As the Financial Controller of the company, respond to the Production Manager’s expectation by explaining the “expectation gap” in audit giving further examples of the public perception of audit. 34. In the context of the auditor's report, ISA 700 (as amended) ‘Forming an opinion and reporting on financial statements’ explains the form and content of external audit reports: Critically discuss the Auditor’s responsibility paragraph in an unmodified report of a rural bank.

Answer 1

Auditor's responsibility:

The primary aim of the external auditor is to make the financial statements free from the errors as disclosed by the personnel and later when coming to the rural bank, besides the mentioned above financial standards correction he has to undergone these elements of audit even.

1. In case of dual control of the vault, both the persons who have access to the vault should be present when referring to the auditing of the transactions.

2. In case of single control of the vault, the auditor will check the dates of sick leaves if taken by the person to be exactly the same without anyone having access to the vault except in the case of approved documentation of control change.

3. If the bank doesn't have a proper record of employee and his/her duties the rural bank should implement a proper matrix by effectively separating duties.

4. The auditor has to observe the various transactions in a bulk happening suddenly so that he can test them apart from the other transactions happening inappropriately otherwise.

5. He has to make sure that various codes of vaults or alarms have been changed or not after termination of the employee having access to it previously.