Reference no: EM133062907

Question 1. Discuss the regulatory and ethical framework within which auditors operate

Question 2. Explain the concept and importance of auditor independence

Question 3. Explain the auditor's legal liability to clients (and other parties, where appropriate)

Question 4. Discuss audit quality and drivers of audit quality

Question 5. MQ Chartered Accountants (MQ) was the auditor for Wartz Limited (Wartz) for the financial year ending 30 June 2020. In August 2020, Downtown Limited (Downtown) made a successful takeover offer of Wartz Limited based on the unmodified 2020 audit report issued by MQ. Shortly after the takeover, Downtown discovers that the inventory of Wartz had been materially overstated as there were large quantities of inventory that did not exist, were damaged, or unsaleable. It is subsequently revealed that MQ did not attend the stocktake at all locations at which Wartz held its inventory. Downtown is taking legal action against MQ for losses it has incurred in the takeover of Wartz.

a. Do you think MQ will be found liable to Downtown? Why or why not?

b. Do you think that the requirements that need to be met before an auditor may be found liable to a third party are fair? Why?

Question 6. With reference to the APESB et al. (2020) Independence Guide, explain:

a. How does independence relate to the APES 110 Fundamental Principles, and what are the two elements of independence required?

b. What is a Public Interest Entity, and why are there more stringent rules for auditor conduct in relation to PIEs?

c. Briefly explain the requirements of APES 110 (2018) for PIEs in relation to audit partner rotation, non-audit services and fees.