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Identify the independence factors, that you will need to consider in order to determine whether your firm can put itself forward to act as the first auditors of Gadget limited and the measure that may be taken to resolve any perceived conflicts.

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Introduction

Coursework -Semester 2 2003/2004 1. Identify the independence factors, and any other issues, that you and your co-partners in Ernest Peat & Co will need to consider in order to determine whether your firm can put itself forward to act as the first auditors of Gadget limited and the measure that may be taken to resolve any perceived conflicts. The purpose of an audit is to provide an 'independent Examination by an appropriately qualified person for the benefit of interested parties to whom the auditor reports to'. The principle of auditor independence is established via the Companies Act, and also an ethical code. Auditors are therefore expected to be independent of those whose work they are auditing and to whom they are reporting. There are two types of audit independence 1- Practitioner independence 2- Profession independence Practitioner independence: is the state of mind of the actual auditor. There are three types of independence that may determine whether independence has been put at risk. > -Programming independence - this is where auditors have the freedom to develop their own programme and the amount of work to be performed, within the overall bounds of the engagement. > -Investigative independence - this requires that no legitimate source of information to be closed to the auditor. ...read more.

Middle

Ms Jordan, First of all may I express my gratitude for choosing Earnest Peat & Co to act as your first auditors. Further to out initial contact I have the pleasure in providing you with the information requested on the following information i. Regulations regarding audit exemption of small companies as recently amended. ii. The benefits to the company and its users/stakeholder of undergoing an audit. iii. The accounting records that must be maintained in order to comply with the requirements of the Companies Act 1985. Please see enclosed attachment. I have included an explanation of the key points that are raised which I hope are of use to in clarifying any previous misleadings which you may have had . It is of importance that arrangements are made at a convenient time for both of us to meet in order to discuss any points that you may wish to raise. In the mean time if you have any questions you can contact me on the above number. I look forward to hear from you and would again like to extend my thanks to you for choosing Earnest Peat & Co. Your Faithfully Mr Nurul Ali For and on the behalf of Earnest Peat & Co. Registered Auditors with ICAEW Chartered Accountants with ACCA i) ...read more.

Conclusion

'a record of the assets and a liabilities of the company' By assets means al 'statements of the stock held' A record of the stock, which are held on the premises as well as purchased stock on delivery, must be kept. If it has been bought it must be accounted for. 'all statements of stocktaking's' Stock take's must be carried out in order to support the value of the stock 'all goods sold and purchased' Once goods are purchased for example plant and machinery they must be included in the Assets of the company. Evidence supporting such purchases such as invoices are needed as some company's may amplify the value of their current assets in order to perceive their business as being more healthier. Goods sold must also be included. In some cases where goods are sold for more than the purchase price, the difference will be added to the company's overall profit and hence be subject to Capital Gains Tax. Equally asset sold at a loss must be included to reduce the company's overall profit. NOTES and therefore auditors must be objective by expressing opinions independently of the entity and it's directors. Therefore the principle objective underpinning an auditor is to remain independent in order to provide an objective Yours Faithfully Earnest Peat & Co. Registered Auditors with ICAEW For and on behalf of Earnets Peat & Co. Nurul K Ali ...read more.

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