- 10 Marks
AAA – May 2018 – L3 – Q3a – The audit approach, Audit evidence, Reporting
Discusses the auditor’s responsibilities in relation to laws and regulations, non-compliance issues, and policies for prevention and detection of non-compliance.
Question
a) At a final meeting with the client, DMS Ltd, one of the Audit Partners of DTR & Co Chartered Accountants had an argument with the Finance Director of DMS Ltd on an issue that borders on compliance with a relevant law. The Environmental Protection Authority had sanctioned DMS Ltd for environmental regulation breaches for the year 2016. The Finance Director was of the view that the external auditors are to be blamed for negligently failing to plan their audit to detect such non-compliance with environmental regulations.
Required:
i) Explain the responsibility of external auditors in considering laws and regulations in an audit of financial statements. (2 marks)
ii) Explain the issue of non-compliance in relation to laws and regulations in an audit. (2 marks)
iii) Explain the policies and procedures which may be implemented to assist management in the prevention and detection of non-compliance with laws and regulations. (6 marks)
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