ACC311 Assignment No. 1 solution
Friday, October 29, 2010 Posted In Acc Edit ThisSemester “Fall 2010”
“Auditing (ACC311)”
Assignment No. 01 Marks: 20
Question 1:
MR. A is a newly inducted trainee student in the audit firm. He thinks that auditor should
conduct an audit with a detective approach and should look only for frauds. Principal, Mr. X
tells him that audit has to be conducted with an approach of professional skepticism. The
principal has asked you to explain the concept of professional skepticism to Mr. A. (10)
Question 2
Explain Auditor’s responsibilities with respect to confidentiality of information. (10)
Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no.8 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from Online VU Lectures.
Schedule
Opening Date and Time October 26, 2010 At 12:01 A.M. (Mid-Night)
Due Date and Time October 29, 2010 At 11:59 P.M. (Mid-Night)
solution
professional skepticism is conducting the audit with a questioning mind and ensuring critical assessment of the audit evidence. this means that the firm should neither go into the audit thinking that the client is very honest nor thinking that he is absolutely dishonest
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Basic principles governing an audit
SA 200 “Basic Principals Governing an Audit”, describes the basic principles which govern
the auditor’s professional responsibilities and which should be complied with wherever an
audit is carried. They are described below:
(i) Integrity objectivity and independence: An auditor should be honest, sincere,
impartial and free from bias. He should be a man of high integrity and objectivity.
(ii) Confidentiality: The auditor should respect confidentiality of information acquired
during the course of his work and should not disclose the information without the
prior permission of the client, unless there is a legal duty to disclose.
(iii) Skill and competence: The auditor must acquire adequate training and experience.
He should be competent, skillful and keep himself abreast of the latest developments
including pronouncements of ICAI on accounting and auditing matters.
(iv) Work performed by others: If the auditor delegates some work to others and uses
work performed by others including that of an expert, he continues to be responsible
for forming and expressing his opinion on the financial information.
(v) Documentation: The auditor should document matters which are important in
providing evidence to ensure that the audit was carried out in accordance with the
basic principles.
(vi) Planning: The auditor should plan his work to enable him to conduct the audit in an
effective, efficient and timely manner. He should acquire knowledge of client’s
accounting system, the extent of reliance that could be placed on internal control and
coordinate the work to be performed.
(vii) Audit evidence: The auditor should obtain sufficient appropriate evidences through
the performance of compliance and other substantive procedures to enable him to
draw reasonable conclusions to form an opinion on the financial information.
(viii) Accounting System and Internal Control: The management is responsible for
maintaining an adequate accounting system incorporating various internal controls
appropriate to the size and nature of business. He auditor should assure himself that
the accounting system is adequate and all the information which should be recorded
has been recorded. Internal control system contributes to such assurance.
(ix) Audit conclusions and reporting: On the basis of the audit evidence, he should review
and assess the audit conclusions. He should ascertain:
SA 200 “Basic Principals Governing an Audit”, describes the basic principles which govern
the auditor’s professional responsibilities and which should be complied with wherever an
audit is carried. They are described below:
(i) Integrity objectivity and independence: An auditor should be honest, sincere,
impartial and free from bias. He should be a man of high integrity and objectivity.
(ii) Confidentiality: The auditor should respect confidentiality of information acquired
during the course of his work and should not disclose the information without the
prior permission of the client, unless there is a legal duty to disclose.
(iii) Skill and competence: The auditor must acquire adequate training and experience.
He should be competent, skillful and keep himself abreast of the latest developments
including pronouncements of ICAI on accounting and auditing matters.
(iv) Work performed by others: If the auditor delegates some work to others and uses
work performed by others including that of an expert, he continues to be responsible
for forming and expressing his opinion on the financial information.
(v) Documentation: The auditor should document matters which are important in
providing evidence to ensure that the audit was carried out in accordance with the
basic principles.
(vi) Planning: The auditor should plan his work to enable him to conduct the audit in an
effective, efficient and timely manner. He should acquire knowledge of client’s
accounting system, the extent of reliance that could be placed on internal control and
coordinate the work to be performed.
(vii) Audit evidence: The auditor should obtain sufficient appropriate evidences through
the performance of compliance and other substantive procedures to enable him to
draw reasonable conclusions to form an opinion on the financial information.
(viii) Accounting System and Internal Control: The management is responsible for
maintaining an adequate accounting system incorporating various internal controls
appropriate to the size and nature of business. He auditor should assure himself that
the accounting system is adequate and all the information which should be recorded
has been recorded. Internal control system contributes to such assurance.
(ix) Audit conclusions and reporting: On the basis of the audit evidence, he should review
and assess the audit conclusions. He should ascertain:
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