1. Salim is the audit manager of a team engaged on the audit of a listed company. During his initial discussion with the chief executive officer (CEO) of the company, he was informed that pandemic depressed economic conditions have badly affected the company and its liquidity. Due to uncertainty about the future of the company, certain key employees have left including several staff members of accounting and finance department. Consequently, the accounting records are in a bad shape and the management is making efforts to complete the draft accounts quickly. CEO therefore requested Salim to carry out necessary accounting work and to help prepare the annual financial statements at a fee to be agreed mutually

. Do you think there is a kind of threat to the fundamental principles of professional ethics in the above situation?

Explain the extent of support that can be offered by the auditors, in the above situation in guidance of Professional Accountants code of ethics.

2. Your firm has recently been appointed as auditor to Danish, a private company that runs a chain of small supermarkets selling fresh and frozen food, and canned and dry food. Danish has very few controls over inventory because the company trusts local managers to make good decisions regarding the purchase, sale and control of inventory, all of which is done locally.

What will your objectives in regards to the internal control system of the company ?

Which steps you will take to evaluate the internal control system of the company ?