Answered step by step
Verified Expert Solution
Question
1 Approved Answer
An auditor has to collect information for the client acceptance decision. Define at least five procedures that an auditor should perform ot colect relevant information
An auditor has to collect information for the client acceptance decision. Define at least five procedures that an auditor should perform ot colect relevant information for hisher decision whether to accept Airlines as client or not.To get a first impression about Airlines' financial situation and performance, use the financial information integrated ni the case to calculate liquidity ratios ie Accounts Receivable Turnover, Debt ot Equity and Current Ratios profitability ratios ie ROE, ROA, Profit Margin, Share of Fuel Cost ni Total Cost, Share of Aircraft Leases ni Total Cost and solvency ratios ie Asset to Equity, Times Interest Earned Also, compare Airlines' ratios to the industry ratios provided ni the case. Identify and discuss any major differences. Try to analyse which risks may result from modifications to the balance sheet and income statement with respect to key figures for the auditor.Are there other financial matters that should be considered before accepting Airlines as a client?Beside financial matters, other aspects should be considered before accepting Airlines as a client. What nonfinancial matters mentioned in this case study could be relevant for the client acceptance decision? How important are each of these non financial matters?Airlines expects that Europestars will help to optimise the new TI system. What are the pros and cons when an audit firm provides both auditing and TI consulting services? Discuss whether European regulation and the IFAC code of ethics will allow Europestars to help Airlines with their TI system and at the same time to carry out a statutory audit of the financial statements.As indicated in the case, one of the partners ni another firm of the 'Allstars' network has invested in a venture capital fund that owns shares of Airlines Equity. Does this fact violate the auditor's independence? Discuss why or why not, and consider theconsequences.Your team has to make a recommendation to the managing partner as to whether Europestars should accept the audit engagement of the Airlines Company. What would you recommend? Include consideration of reasons both for and against acceptance and use both financial and nonfinancial information to justify your recommendation.
An auditor has to collect information for the client acceptance decision. Define at least five procedures that an auditor should perform ot colect relevant information for hisher decision whether to accept Airlines as client or not.To get a first impression about Airlines' financial situation and performance, use the financial information integrated ni the case to calculate liquidity ratios ie Accounts Receivable Turnover, Debt ot Equity and Current Ratios profitability ratios ie ROE, ROA, Profit Margin, Share of Fuel Cost ni Total Cost, Share of Aircraft Leases ni Total Cost and solvency ratios ie Asset to Equity, Times Interest Earned Also, compare Airlines' ratios to the industry ratios provided ni the case. Identify and discuss any major differences. Try to analyse which risks may result from modifications to the balance sheet and income statement with respect to key figures for the auditor.Are there other financial matters that should be considered before accepting Airlines as a client?Beside financial matters, other aspects should be considered before accepting Airlines as a client. What nonfinancial matters mentioned in this case study could be relevant for the client acceptance decision? How important are each of these non financial matters?Airlines expects that Europestars will help to optimise the new TI system. What are the pros and cons when an audit firm provides both auditing and TI consulting services? Discuss whether European regulation and the IFAC code of ethics will allow Europestars to help Airlines with their TI system and at the same time to carry out a statutory audit of the financial statements.As indicated in the case, one of the partners ni another firm of the 'Allstars' network has invested in a venture capital fund that owns shares of Airlines Equity. Does this fact violate the auditor's independence? Discuss why or why not, and consider theconsequences.Your team has to make a recommendation to the managing partner as to whether Europestars should accept the audit engagement of the Airlines Company. What would you recommend? Include consideration of reasons both for and against acceptance and use both financial and nonfinancial information to justify your recommendation.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started