Services To The Subsidiaries Of The Company-Myassignmenrthelp.Com

Question: Discuss About The Services To The Subsidiaries Of The Company? Answer: Introducation Provision of Book keeping services to the subsidiaries of the company to which audit services are being provided since 3 years.The main threat to audit independence the self-review threat. The threat is that the subsidiaries will be provided book keeping services by APG audit firm to SFL Limited and there is a risk that the auditors may manipulate the books in order to present a good position in the consolidated financial statements of the holding company SFL Ltd. as the APG firm has been auditing the parent company since last 3 years and is aware of all the loopholes of the financial statements and is hence its reviewing own work shall be biased. The safeguards for this threat can be : The audit team should not be assigned book keeping of the subsidiaries . Book keeping should be assigned to a third party. In the case where both for holding and its subsidiaries there is only one auditor appointed there could be a case where his audit procedures could not be sufficient. Hence outsider team should be appointed for book keeping. In such case, auditor independence is difficult . The senior auditor of AFG, Billie has been in the audit team of competitor company Alliance Ltd. for many years and now the company Alliance Ltd. is providing help to Billie in the form of acting as guarantor of her loan.The main threat to audit independence the self-interest threat. The threat is that previous client is providing Billie help with regard to guarantee for her home loan.Billie may expect such kind of help from AFG Ltd. also in the future. Such expectations shall lead to self-interest threat . The safeguards for this threat can be : The senior audit personnel should be rotated from time to time for every client . Policies and procedures shall be set so that auditor remuneration and fees shall be pre-determined The auditor's opinion may be affected because his client has obliged him by giving him his guarantee for his home loan. So he may not correctly report his findings in the audit report. In such case, auditor independence is difficult. The senior partner auditor of AFG, Sandy is in the audit team of Sunbeam Ltd. and has received a high concession in his personal trip. The main threat to audit independence the self-interest threat. The threat is that client Sunbeam Ltd. has provided Sandy with 65% concession in a personal trip of Sandy and hence the auditor shall change her opinion after getting such nonfinancial benefits from the client.The safeguards for this threat can be : The senior audit personnel should be rotated from time to time for every client. Policies and procedures shall be set so that auditor remuneration and fees shall be pre-determined. The auditors opinion may be affected because his client has obliged him by giving him concession in his expenses for his personal trip. So he may not correctly report his findings in the audit report. In such case, auditor independence is difficult. The current senior manager who is in audit team of Resources Techno Ltd. has agreed to provide the client with advertising and business promotion of Resources Techno Ltd. products. The main threat to audit independence the self-interest threat. The threat is that the senior manager Aaron has decided to be in the potential employment of his audit client Resources Techno Ltd. by providing the company with the services of promoting the product of Resources . In lieu of this service, he shall be provided with financial benefits from the client whom shall lead to change in auditor opinion. The safeguards for this threat can be : The senior audit personnel should be changed for the client company. The auditors opinion may be affected because his client will provide him some fees for the promotion of the clients products. So he may not correctly report his findings in audit report due to monetary benefits. In such case, auditor independence is difficult. The current senior manager who is in audit team of Admiralty Ltd. was one of the senior accountants of the client company three years back. The main threat to audit independence the self-review threat. The threat is that the senior manager of audit now was previously employed with the client firm as a senior accountant . Although he had left in the year 2013 from the client firm, he may be knowing the practices of maintaining books of accounts and also manipulation of accounts done by client firm. It may be possible that Larry Miller may have self-review threat with regard to some information in the books which he had maintained in the past. The safeguards for this threat can be : Another Chartered Account shall be appointed for reviewing the work of Larry. The ethical issues should be discussed with those charged with governance. Although there is a threat that there may be a problem of self-review of the client's books, but it might be possible that a gap of 3 years may be sufficient enough for unbiased opinions. In such case, auditor independence is possible. References APESB. Compiled APES 110 Code of Ethics for Professional Accountants, 2006. https://www.publicaccountants.org.au/media/711182/APES-110.pdf Christine Jubb, Auditing and Assurance: A Business Risk Approach (Deakin University, 2012) Karla, Johnstone, Audrey, Gramling Larry E. Rittenberg, Auditing: A Risk Based-Approach to Conducting a Quality Audit (Cengage Learning, 2014)