Cuthbert Ltd outsources most of its accounting function to Speedy Accounting Services Ltd. They have found the relationship with Speedy very effective. However, recently it has come to Cuthbert’s attention that the statements of account sent by Cuthbert’s main supplier have not been successfully reconciled for six months. The accountant of Cuthbert has also heard a rumour that Speedy are in financial difficulties having lost clients recently. Speedy have sent a report by Bludger & Co, their auditors, on the suitability of design and operating effectiveness of the system by which Cuthbert’s records are maintained. Tickitt & Run, the auditors of Cuthbert, are engaged on the audit of Cuthbert for the year ended 31 December 20x7.

Discussion Questions 

1. Why might Cuthbert Ltd outsource its accounting function?

2. What risks do Cuthbert Ltd run as a result of the outsourcing and how might these risks impinge on the financial statements?

3. What risks do Tickitt & Run face in the conduct of the audit?

4. Draw up a checklist of matters that might concern Tickitt & Run on the issue.