The audit partner has just advised you that he has been approached to accept the

Question

The audit partner has just advised you that he has been approached to accept the appointment of auditor to Games Limited. Games Limited is a manufacturer of gaming machines and has been named in a recent anti-corruption enquiry as having offered incentives to state government members to support a proposed bill which would allow an increased number of gaming machines in licensed premises. No charges have yet been laid against Gaming Limited’s or any of its employees. The audit partner explains to you that Games Limited’s auditors were re-appointed for the current financial year at the Annual General Meeting held two months ago. However, Games Limited managing director is unhappy with the existing auditing firm as the audit partner assigned to Games Limited has been changed.

Required: The audit partner is unsure whether he should accept the appointment and has asked you to outline any ethical, legal and other factors to be considered in his decision about whether to accept the appointment for the current year, and to indicate the steps that need to be taken prior to the appointment.

Explanation / Answer

As there have been an enquiry against Games Ltd but no charges have been framed against the company, as an Audit firm we can think of accepting the offer of audit assignment. However, before accepting the appointment , we need to enquire and consult in ceratin ares like;

1. We need to consult with the outgoing Auditor to understand the reason behind the change of auditor, the experience of the previous auditor , any observation regarding the corporate governance framework of the company, any difficulties faced due to interefernce on the audit work etc. Also the state of the Fiancial statments and any controversial point remaining or any dispute outstanding regarding any accounting issue to be understood from the outgoing auditor.

2. We need to understand the gravity of the ani corruption enquiry and possibility of any penalty or lawsuit against the company. We need to understand the reputation of the company in the industry in which it oprtates.

3. We need to understand the intricacies and practices of the Gaming Industry.

4. We need to enquire with the lenders , banks and the regulatory bodied to understand the overall reputation of the company.

If the outcome of all the investigations are found favorable , and no major stumbling block is discovered , we can accept the assignment.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.