Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Yasmar Ahmed is an audit partner in the accounting firm of Big, Small and Inbetween (or BSI). She had previously found significant weaknesses in the

Yasmar Ahmed is an audit partner in the accounting firm of Big, Small and Inbetween (or BSI). She had previously found significant weaknesses in the payroll processing systems of one of her long-standing clients, Parramatta Consolidated Industries Limited (or PCIL). PCILs payroll manager had been informed about this deficiency in the past. As Yasmar prepared for this years audit she discovered that a number of her staff had just resigned. Apparently a group of them decided to leave at short notice and start their own auditing firm. Consequently, she decided to take on some contract audit staff on a temporary basis through an employment agency in order to get the work done in a timely fashion. The agency said that the staff were qualified and experienced in auditing so would need little supervision. Yasmar thought this sounded great so sent the staff out to the client to collect evidence by following the audit plan that she had used for PCIL last year. At the end of the audit the staff confirmed that they found nothing to be concerned about so Yasmar signed the audit report on the financial statements. Later, Yasmar found out that PCILs payroll officer had been arrested for a $1,000,000 fraud against the company that had taken place during the year that she had just audited. It appears that the payroll manager did not improve the systems or advise the directors of the deficient systems that allowed the fraud to occur. A group of PCILs shareholders want to sue BSI for the money lost by the company as it has brought down their share values.

Required

Advise Yasmars partners at BSI as to their potential liability. Refer to any relevant auditing or ethical standards or case law to support your answer and what must be established that an auditor has been negligent.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing

Authors: Allan Millichamp, John Taylor

9th Edition

1844809404, 978-1844809400

More Books

Students also viewed these Accounting questions

Question

Describe the new structures for the HRM function. page 724

Answered: 1 week ago