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Case Study Granny Goggins Auditing Firm

Extracts from this document...

Introduction

Auditing Assignment FA263 Spring 2006 Team Auditing: Craig Collins Lee Harbour James Ingram Iain Seedhouse Yunman (Jason) Wong Contents 1.1 - Case Study - 'Granny Goggins Auditing Firm'...................... 3-6 2.1 - The Main Issues................................................................. 7-8 2.2 - Stakeholders..................................................................... 8-9 2.3 - Issues of Independence...................................................... 9-12 2.4 - Alternatives to the dilemma................................................. 13 2.5 - Evaluation to the Alternatives.............................................. 13-16 2.6 - Conclusion........................................................................ 16 3.1 - Group Summary................................................................. 17-18 4.1 - Bibliography..................................................................... 19 5.0 - Individual Assignments 5.1 - Should Auditors be Responsible for Detecting 20- 23 Fraud in Company Accounts? Iain Seedhouse 5.2 - Should Auditors Rely on Management 24- 27 Representations? James Ingram 5.3 - Should an External Audit be the Price to Pay for 28- 30 Limited Liability? Lee Harbour 5.4 - Should Auditors Liaise with Non-executive 31- 33 Directors About the Audit Strategy? Jason Wong 5.5 - Should Audit Working Papers be Standardised? 34- 37 Craig Collins 6.1 - Appendices 38- 40 1.1 - Case Study - 'Granny Goggins Auditing Firm' A brief outline: "A client of an auditing firm did some work for the auditing company. A reduced rate was then given to the client when invoiced for the auditing work done during the year." 'Granny Goggins Auditing Firm' was formed fifteen years ago by eight original partners and still operates in the Lake District. The main office is situated in Greendale where the majority of the work is done. Of the original eight partners six still remain and two have been replaced by two new partners, as the original partners left to form their own company. The current partners of the company are: Pat Clifton - Senior Partner Katty Pottage Alf Thompson Dorothy Thompson Granny Dryden Miss Hubbard George Lancaster Peter Fogg - Junior Partner 'Granny Goggins Auditing Firm' currently has eight partners, four managers and twelve other staff including office juniors and administration clerks. The firm is currently turning over two million pounds annually and has four hundred clients. ...read more.

Middle

The first group meeting took place on Wednesday 15th March where we were all in attendance. We met in the computer annex and discussed our ideas on how we were going to address answering the case study. After long discussions an action plan was drawn up (which is included appendices 6.1) on how we were going to tackle writing the report. We used the ethical decision model as a way to spilt the work into five sections in order so we could all write some of the report and then bring it together at a later stage. We emailed the notes we had all made on each section in order to write the report fully. We gave ourselves a five day deadline to complete the necessary parts of the group work. Some members at this stage had already completed their individual question but others had only just started. We set ourselves a slightly longer deadline to complete these. As previously had been agreed we all emailed the parts of the report we were meant to do to each other by the evening on Monday 20th March. This enabled us all to have a read of the work so far and make notes on any changes we wanted to make and any other points we needed to discuss. We then had a brief discussion on the Tuesday via email and then had a proper meeting on the Thursday. During this meeting we began to bring all the work together into one flowing report, after all the sections were in place we all had a read and made suggestions on what changes needed to be made. It was at this stage parts of the report that items such as the bibliography, contents and the final conclusion were produced. Other important details to make the report look professional such as page numbering and ensuring the same font is used throughout the report were achieved. ...read more.

Conclusion

This allows straight account to account comparison although this is still an assumption and caution must be taken into account when comparing company's accounts. Having auditing working papers standardised does mean the profession becomes quite rigid and due to every audit being different auditors still need to use professional judgement in certain situations. Certain circumstances or industries can throw problems to an auditor that they may have not encountered before or are not covered in the ISA's to combat this there are practice notes and bulletins. 'Practice notes give guidance to assist auditors in applying standards in particular circumstances and industries'. (ACCA Audit and Internal Review 2005) As stated here practice notes are used to judge certain situations not specifically covered under ISA's and apply them to standards. Also there are bulletins that provide auditors with guidance on new or emerging issues. Both practice notes and bulletins are acceptance to the fact that there is a flaw in standardising auditing as there are many variations of situations or new situations emerging and it is impossible to cover all of these with standards. Practice notes and bulletins though are put into place and help auditors to work in conjunction with existing standards. To set a standard is to agree on a level of quality. Standards are used to achieve high quality and in a profession such as auditing where quality of opinion is vital to so many people standards are of up most importance. Standardising auditing papers brings a level of quality that allows confidence when viewing accounts, it brings uniformity to national companies to allow comparability and it brings auditors to, on the majority of occasions act ethically. Without standardisation of audit working papers the financial markets would be a corrupt and impossible place to work in. Standardisation of auditing is vital and will continue to be as long as there are people willing to invest their money, without these standards 3rd party confidence would be null and void and the auditing profession would be a useless commodity. ...read more.

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