Audit and Assurance Services for Information Concern

Question: Discuss about the Audit and Assurance Services for Information Concern. Answer: Introduction: The basic obligation of an auditor is to make and provide the client or the shareholders of the company information as an independent party. The team provides information concerning the annual reports whether valid and fair and confirms the annual accounts reflections. Through this the information concerning the financial status of a company is justified whether the company can be relied on by lenders and financial institutions. With regards to the case of King and Queen auditing firm, Impulse Pty Ltd Company and their creditor EFLs solicitors, the crediting company cannot lay a valid claim on King and Queen auditing firm according to the standards guiding auditors activities and boundaries. The financial organization EFLs solicitors audit firm negligence they are to experience losses from their debtor. In this case the audit firm cannot be made liable for the losses the creditor is yet to occur since they had no relationship with EFLs solicitors enabling them to give information about their client Impulse Pty Ltd and the company (Carmichael, 2009)). The audit company did their part according to work relation required between an audit firm and the client, therefore, the director of the company should be laid liable. This scenery is similar to the case of Stone Rolls v Moore Stephens where the court ruled on the favor of the audit firm stating that audit team should only be liable to such claims when they are shareholders of the company. In the case of Centro the associates, the same claim was witnessed (Carmichael, 2009)). In all the cases, the court ruled in support of the audit firms justifying that auditors can only be liable to when they are shareholders or offering advisory services to the client. In the case of Centro, Justice Middleton found that the directors are entitled to rely upon other parties but discovered that there is no suggestion in the case. Centro was not warranted or trusted and that the information is misplaced. The judge claimed that it is upon the management make proper examination before getting involved in any investment. In the judges ruling he declared that directors and management should not always relay on information given by other parties. It is therefore clear that the court will rule on the favor of King and Queen Audit firm in this given study case (Cuccia et al, 2011)). The engagement letter between King and Queen and their client Impulse Pty Ltd and the company states various roles of the audit firm which does not describe liability to the third party in case it is a breach of the audit professional standards. The case however, will change when the King and Queen develop an engagement with the company financier as the company adviser. Auditors are responsible for the provision of information to creditors and other financial institution in order to create credibility concerning their clients (Knapp, 2005). In a situation where kings and Queen were consulted by the financial firm and failed to provide the appropriate information regarding the financial situation of Impulse Pty Ltd and the company then the firm should be responsible for their action. For any given bank or any financier to offer credit to a business entity then the audit firm is considered to be responsible (Elliott Jacobson, 2008). The professional standards, requires that auditors should provide valid and independent opinion which is in accordance with the objectivity. In this case the audit firm is therefore providing non audit services to the financial firm and should be blamed if they provide an information which leads t he company towards its downfall. King and Queen therefore will most likely to compensate the financier of their client for providing them with wrong and biased information. Audit independence is the freedom or independence of an external audit firm or team. Audit independence in most of the time is symbolized by the audit integrity and audit objections. Apart from the mentioned integrity and objectivity, the independence of the auditors can also be determined approaches and the process they apply while performing their duties (Knapp, 2005). The objectivity of audit independence requires an auditor or and an audit firm to perform their obligations in a free environment in a systematic manner an approach. The aspect of audit independence is divided into two categories that is the actual or real audit independence and perceived independence. Actual Audit Independence Actual audit independence is also known as the real independence of auditors. This kind of audit independence is also referred to as the independence of an auditors mind during performance of a given action. Real or actual independence precisely deals with the state of mind an auditor is when taking his or activity. It is focused at determining how an auditors acts in a given situation (Keefe et al 2013). An auditor or audit firm who is viewed to be acting independently or (in fact) is mandated and given authority to make independent decisions in all situation they are found. They come up with solutions independent even in occasions which are being perceived as lacking independence. Importance Actual Audit Independence Actual audit Independence is important as it enables an auditor to act and apply various approaches relevant to the situation (Keefe et al 2013). Real independence of the auditors assist them make independent decisions which are not biased even when they are placed in a compromising position by company administration or a client. The actual independence also allow auditors to be responsible and liable for their actions in a given situation. Perceived Audit Independence The perceived independence is another type of auditors which comes in where an auditors objectivity is considered to be beyond answerable questions and cannot be measure. There are several situations where an auditors action can be justified as either independent or not (Keefe et al 2013). It clear that an auditors mental attitude cannot be measured to determine his or her level of integrity. Perceived auditor independence is therefore concerned with the objectivity of an auditor. Importance of Perceived Audit Independence Perceive audit independence helps in answering of the question relating to audit objectivity. It also provides environment or room for an auditor to act upon a situation which is perceived not be independent (Stewart Subramanian, 2010). It is essential that the auditor not only acts independently, but appears independent too. Perceived audit independent is helps an auditor to make decision and self-governance towards reliable financial reliability and financial objectivity. In this situation Bob has violated professional conduct dealing with the observation of confidentiality as expected by the standards as listed below: Bob has failed to observe and work with integrity, honesty, faithfulness and truthfulness. This principle of objectivity which demands that auditors should be fair, intellectual and free from conflicting interest. Auditors have the mandate to respect the confidentiality of information about a clients or employers affairs acquired in the course of professional services. An obligation which remains even after the end of work relationship. Confidentiality further requires that if an auditor such as Bob comes across an information in the progress of carrying out professional services he should use nor seem to use that information for own benefit or for the benefit of a third party. In this case Bob has violated professional codes of ethics and should be followed by the company and be responsible for his actions (Stewart Subramanian, 2010). He should not be certified as qualified auditor for the violation of the codes of conducts. On the other hand Bob should have obtained the information through a legal means as prescribed by the law or through the authority of the administration. Case of Wendy The audit standards does not allow an associate of a given firm to perform audit or have relationship with the company as this may lead a conflict of interest. The firm should use an external audit firm or an auditor. Relationships should be avoided which allow prejudice, bias or influences of others to override objectivity. Audit profession standards requires and auditor to be independent, therefore in this case external audit firm should be brought in to assist with analysis and Leo held responsible for his actions. The case of Chan Associates and Classic Reproductions Pty. Limited Auditors and accountants should neither accept nor offer gifts or entertainment which might reasonably be believed to have a significant and improper influence on their professional judgment or those with whom they deal. Auditors and accountants should avoid circumstances which would bring their professional standing into disrepute. The professional standards as stated above obligate an audit of audit firm to accept offers from the client which may influence their judgments. Therefore, the acceptance of the offer by Chan associates should have not accepted the offer of being shareholders (Reiter Williams, 2004). The situations though tend be solved where Chan and associates as shareholders do not offer audit services to the same company where they are shareholders as this may result into pressure on the audit objectivity. Reference Carmichael, D. R. (2009). In search of concepts of auditor independence. 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