Question

a. You are the owner of ABC Auditing firm. A company comes to you and offers to hire you to perform an audit that was started by another company, who have been dismissed. What considerations would help to decide if you would accept the offer?

b. What is a financial audit and what is an operational audit? How are these two types audits similar? How are they different?

c. During an audit your discover that an employee embezzled $5 ten years ago. What would you?

d. You present the audit report to your client. Your client disagrees with some information and conclusion in the audit report, How would you handle it?

d. What is the rationale of why the audit firm owns all workpapers?

Answer 1

a.

Well, to accept the offer of Audit , followings points needs to be considered:

• previous year's financials of the company & auditor's remarks in audit report.
• the reason why previous auditor was dismissed from audit work
• scope of audit work
• business of company and market reputation of company.

b.

Financial audit is conducted in order to audit the financial statements of the company & to express view on the same that whether it meet the specified standards and principles as per prescribed guidelines by specified authorities.It is generally done by external auditors.

Operational audit is conducted within the organisation and it can be performed internally as well ( as in by the internal auditors).

Under operational audit , systematic review of organisational activities together with its effectiveness and efficiency in order to meet the objective goals of the company.

The similarities between the operational & financial audit is to make sure that financial & operational cost and work are in place & its effective in order to achieve the objective of the company.

The difference between the financial & operational audit is that the financial audit is conducted by the external auditors , however the operational audit can be conducted by the internal auditors as well.

Financial audit is conducted once in a year while operational audit is an ongoing process which can be conducted throughout the year .

c.

well if an employee embezzled $5 then yeras ago , and if that employee is still active in the organisation then he may be sued for that very reason , however if that employee has left the organisation then , that amount should be written off as bad debts & should close the books of accounts, as that is not a bog amount to be considered.

d.

Well, if the client disagree with the some information & conclusion in the audit report , then we will discuss on the reason behind the same , if the explanation given by them is genuine & justified then it may be considered or else audit report will be issued with the negative remarks.

e.

The workpaper of audit are the property of auditors , & it is exclusively belongs to the auditors. With the help of same & on the basis of same, the auditors gives the remarks on the audit report , whether positive or negative.During the course of audit , the auditor prepares the summary of work done by them which is called as workpaper,