QUESTION ONE

In a management board meeting, the Financial Controller (FC) has brought in an engagement letter along with the cost for the service from the external auditor. As the discussion goes on, some of the members feel that there is no need for their services since the organization is financially viable.The FC gets more surprised as the members remind him of the other urgent needs of the organization where the funds can be used instead of paying the auditors. Due to the sharp arguments between the members, the Chief Executive Officers tabled the meeting that he may do further consultations.

Required:

i.What are benefits of the auditor's report to the organization?

ii.Assume as a CEO, you have consulted with a partner for Deloitte auditing firm, show what facts you should have to your board members.

iii.What are some of the myths about auditing services and how could they be addressed?

QUESTION TWO

Parable of the Shrewd Manager

1Jesus told this story to his disciples: "There was a certain rich man who had a manager handling his affairs. One day a report came that the manager was wasting his employer's money. 2So the employer called him in and said, 'What's this I hear about you? Get your report in order, because you are going to be fired.'

3"The manager thought to himself, 'Now what? My boss has fired me. I don't have the strength to dig ditches, and I'm too proud to beg. 4Ah, I know how to ensure that I'll have plenty of friends who will give me a home when I am fired.'

5"So he invited each person who owed money to his employer to come and discuss the situation. He asked the first one, 'How much do you owe him?' 6The man replied, 'I owe him 800gallons of olive oil.' So the manager told him, 'Take the bill and quickly change it to 400gallons.*'

7"'And how much do you owe my employer?' he asked the next man. 'I owe him 1,000 bushels of wheat,' was the reply. 'Here,' the manager said, 'take the bill and change it to 800bushels.*'

8"The rich man had to admire the dishonest rascal for being so shrewd. And it is true that the children of this world are more shrewd in dealing with the world around them than are the children of the light. 9Here's the lesson: Use your worldly resources to benefit others and make friends. Then, when your earthly possessions are gone, they will welcome you to an eternal home.*

10"If you are faithful in little things, you will be faithful in large ones. But if you are dishonest in little things, you won't be honest with greater responsibilities. 11And if you are untrustworthy about worldly wealth, who will trust you with the true riches of heaven? 12And if you are not faithful with other people's things, why should you be trusted with things of your own? New Living Translation.

Required:

1.Assume that you are the experienced auditor and the owner of this business has told you this story, would you want to engage and auditor? Support your reasons.

2.Suppose the report was in a famous daily newspaper, what would be your analytical procedures?

3.What is the role of the auditor under such a fraud environment according to ISA 240?

QUESTION THREE

A District Council Treasury has been reported by the President's office that the funds are being misappropriated. The provincial office of the Auditor General has been given a directive by the President to audit the reported council. In the letter to the Auditor General, the matters raised are lack of proper banking, vehicles are not controlled by logbooks, receipts for collections from the council shops and other industries are not accounted for by the treasury office.

Required

1. In such a case, what type of funds would you need to audit?

2. Draw up an audit program which would be able to capture the needs of the directive from the president.

QUESTION FOUR

The board members have just received the auditor's report that has unqualified opinion. Some of the board members are very annoyed. "This is why we are saying Mr. Chairman that the financial controller is not doing a good job. Even the auditors' have not qualified our financial statement." Yes sir, another contributor joins, " It means now even if we took this report to our bank, we can no longer enjoy our loan facilities." Meanwhile the financial controller is just smiling as he listens to these members. "You see, he is not even concerned, the financial controller thinks we are joking." The chairman suggests that the external auditor be called to assist in the interpretation of the financial statement. The idea is welcomed and the meeting has ended.

Required

1. Write down a report that will be read to these members on the meaning of unqualified opinion.

2. Explain the implications of the other modifications to the standard opinion.