Accounting Homework – Coursework Example
Accounting homework Auditing can be delineated as a process of conducting a financial examination on the firm’s booksaccounts as well the laid down internal controls of the firm.
In the case presented in this scenario, Craig Throne in this case the external independent auditor is supposed to conduct audit on the books accounts or the financial statements of Allent Company where the audit fees will be based on reported profits. The parties that might be affected by the proposed audit engagement where the fees of the external auditors are dependent on the reported profits will include Thrones audit company, Allnet Management, and the user of the audited financial statement who may include ( Potential investors, existing shareholders, government, and suppliers)
The ethic factor in this scenario independency of the external auditors; the external auditor is supposed to offer his or her opinion independently resulting from examining the client’s books of accounts and internal controls (Kelly, 89). In the scenario above, the auditors remunerations are pegged on the company reported profits, thus, raising the question of conflict of interest.
Auditor’s independence in carrying out their duty is very vital, therefore, I would advise against any audit engagement where the auditor the independency of the auditor is being questioned due to conflict of interest. Therefore, I would advise Throne’s company against committing themselves to such audit engagement.
In conclusion, as discussed above the ethical consideration guiding the above recommendation is conflict of interest. The fact that the auditor remuneration is pegged on the company reported profits, raises question on the ability of the auditors to give a fair view on the company financial stamen there by hampering the auditors independency.
Kelly, Louise. Advanced Auditing and Assurance. Dublin: Institute of Chartered Accountants in Ireland, 2013.