Client Engagement – NBC Institute

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

Question

You have recently been appointed the auditors of Spicer Plc, a company whose shares are traded on a stock exchange. The directors of Spicer Plc have recommended that you perform the following services:

The statutory audit of the annual accounts
Taxation services
Consultancy services in respect of the implementation of a new information technology system

Your firm has not acted for Spicer Plc before but does act as auditors to one of its major competitors.

Required:
a. Identify and explain the professional and ethical issues that should have been identified by your firm in relation to the provision of the services outlined above to Spicer Plc and describe the safeguards that should be in place in order to address these issues. (11 marks)

b. What are the five fundamental principles of ethics? Briefly explain their meaning. (5 marks)

c. A client’s affairs should not be disclosed to third parties. However, where a client has been guilty of an unlawful act, to whom should the auditor disclose this information, and in what order? (4 marks)

Answer

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Tags: Client Engagement, Confidentiality, Disclosure, Ethics, Professional Standards
Level: Level 2

Topic: Ethical Issues in Auditing
Series: MAY 2016

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

Question

The nature of the relationship between the audit firm and the client is specified in an engagement letter, which helps reduce the possibility of misunderstanding the auditor’s position. This letter should be reviewed, updated, and signed on an annual basis.

Required:
Explain FOUR (4) mandatory terms contained in an engagement letter.

Answer

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Tags: Audit, Client Engagement, Engagement Letters, ISA 210, Terms
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: DEC 2022

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

Question

You have been recently promoted as the Ethics Partner in Famous Chartered Accountants, a licensed audit firm. At your first visit to the Managing Partner, he informs you of an appointment by Phobia Foods Ltd (PFL), and gives you a file to go through. You open the file and find a copy of an e-mail from the Managing Director of PFL, extracts which read as follows:

From: Managing Director, Phobia Foods Ltd.
To: Managing Partner, Famous Chartered Accountants
Subject: Evaluation of Business Expansion Plan and Associated Items

Congratulations on your offer of appointment as auditor cum advisor of our company. As discussed in our earlier meeting, Phobia Foods Ltd (PFL) would like to open three more outlets, two in Sunyani and one in Sogakope. The necessary financing will be obtained through a new bank loan and the rescheduling of the payments of the existing loan, which is technically in default.

Your appointment and fees
Your audit fee will be GH¢16,000 for the year ended 30 June 2018.Your fee for evaluation of our expansion plan and advisory services in relation to obtaining a bank loan will be GH¢9,000. For advisory services and business efficiency and strategic decisions, your fee will be GH¢3,400 per month for the next two years.

Shareholders and key management issues
Five founding directors, each with equal shares, incorporated PFL which commenced trading in 2009. I still maintain my original 20% holding.

Audit and accounts 2016-2018
Ofosu-Mensah & Associates., a firm of licensed auditors audited the accounts for the years ended 30 June 2016 to 30 June 2018 inclusive. The audit of PFL for the year ended 30 June 2018 was signed off on 16 November 2018 with an unqualified opinion, notwithstanding that qualified opinions had been published on the previous two years’ accounts. The shareholders of PFL approved your firm’s appointment at the annual general meeting held on 15 April 2019 for the year ended 30 June 2019.

The funds raised by the new bank loan will be used for expansion of the business. Your firm is also expected to advise the company on the application for the new bank loan and the rescheduling of repayments of the existing loan in default.

Yours sincerely,
Managing Director.

Required:

Evaluate FIVE (5) risk considerations and issues for Famous Chartered Accountants that should be identified prior to accepting this engagement. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Risk, Auditor Independence, Client Engagement, Ethical Issues, Risk Consideration
Level: Level 3

Topic: Practice management, Professional responsibility and liability, The audit approach
Series: NOV 2020

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

Question

b) You are senior manager in MM & Co, a firm of Chartered Accountants. Recently, you have been assigned specific responsibility for undertaking annual reviews of existing clients. The following situation has arisen in connection with two clients.

i) MM & Co, was appointed auditor for Pen Co last year and has recently issued an unmodified opinion on the financial statements for the year ended 31 March 2013. To your surprise, the tax authorities have just launched an investigation into the affairs of Pen on suspicion of under-declaring income. (7 marks)

ii) Your firm has provided financial advice to the Scot family for many years and this has sometimes involved your firm carrying out transactions on their behalf. The eldest son, Gino, is to take up a position as a senior government official in a foreign country next month. (3 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what action, if any, MM & Co should now take.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Responsibility, Client Engagement, Ethical Issues, Professional Conduct
Level: Level 3

Topic: Professional responsibility and liability
Series: NOV 2015

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

Question

The statutory audit of the annual accounts
Taxation services
Consultancy services in respect of the implementation of a new information technology system

Your firm has not acted for Spicer Plc before but does act as auditors to one of its major competitors.

b. What are the five fundamental principles of ethics? Briefly explain their meaning. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Client Engagement, Confidentiality, Disclosure, Ethics, Professional Standards
Level: Level 2

Topic: Ethical Issues in Auditing
Series: MAY 2016

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

Question

Required:
Explain FOUR (4) mandatory terms contained in an engagement letter.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit, Client Engagement, Engagement Letters, ISA 210, Terms
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: DEC 2022

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

Question

From: Managing Director, Phobia Foods Ltd.
To: Managing Partner, Famous Chartered Accountants
Subject: Evaluation of Business Expansion Plan and Associated Items

Shareholders and key management issues
Five founding directors, each with equal shares, incorporated PFL which commenced trading in 2009. I still maintain my original 20% holding.

Yours sincerely,
Managing Director.

Required:

Evaluate FIVE (5) risk considerations and issues for Famous Chartered Accountants that should be identified prior to accepting this engagement. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Risk, Auditor Independence, Client Engagement, Ethical Issues, Risk Consideration
Level: Level 3

Topic: Practice management, Professional responsibility and liability, The audit approach
Series: NOV 2020

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

Question

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what action, if any, MM & Co should now take.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Responsibility, Client Engagement, Ethical Issues, Professional Conduct
Level: Level 3

Topic: Professional responsibility and liability
Series: NOV 2015

Question Tag: Client Engagement

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AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

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AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

You're reporting an error for "AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing"

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

You're reporting an error for "AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements"

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

You're reporting an error for "AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability"

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

You're reporting an error for ": AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability"

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

You're reporting an error for "AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing"

AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Outlines the mandatory terms that must be included in an engagement letter according to ISA 210.

You're reporting an error for "AA – Dec 2022 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements"

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

You're reporting an error for "AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability"

: AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability

Identify and comment on the ethical and professional issues related to client engagements for Pen Co and the Scot family, and suggest actions MM & Co should take.

You're reporting an error for ": AAA – Nov 2015 – L3 – Q5b – Professional Responsibility and Liability"

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