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Audit And Assurance

Discuss about the Audit Assurance for Risk Assessment & Effective Reporting.

Sample Answer

Introduction

In the first situation mentioned above, it is very clearly being stated by the CEO of luxury travel holidays that they would not reappoint the Clarke and Johnson as the auditor if the auditor would not help them in gaining more business by giving a lecture about the well-doing of the company in the coming seminar. In the given case, the Clarke and Johnson being the independent auditor are not allowed to express an opinion on the financials of the company wherein they are being forced to do so with the fear of losing the engagement (Niemi & Sundgren, 2012).

In the second situation, the CEO of the company is offering an in-kind gift in addition to the audit fees being paid to the auditors only with the want of smooth audit. By the term smooth audit, the CEO meant an unfair audit opinion to be presented to the stakeholders of the company. It is a case of familiarity threat. Since the auditors have long association with the CEO of the company the CEO is trying to mould the opinion of the auditors (Wright & Charles, 2012).

In the third situation wherein it has been mentioned that as a part of the auditors who would be conducting the audit, an accountant will be a part whose father is a financial controller in the Luxury Travel Holidays Company. This is a case of familiar threat. Here Michael would be reviewing the work of his father. He would definitely not report any wrongdoing which might have been conducted during the normal operations of the company by his father or by the other employees of the company as it would lead to loss of job by his father as well as the other employees of the company (Baldwin, 2010). Hence in the present scenario fair opinion of the auditors is not at all expected and would definitely result in the unfair audit opinion.

In the fourth situation, it has been mentioned that Annette was on assignment for making the tax calculations and preparing the entries of such for inclusion in the financials of 30th June 2015 of which the Clarke and Johnson have been appointed as the auditor of the Luxury Travel holidays. In the present case, Annette has been chosen to be a part of the audit team and hence she will have to review her own work done. The biggest independence threat that is seeming to arise is self-review threat. One simply cannot review, judge, analyze the work done by oneself. It is always a compulsion and a necessity to get

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