Reference no: EM133227893

Audit quality You have just started carrying out the fieldwork for the audit of the financial report of Jocular Services Ltd for the year ended 30 June 2018. Through your discussions with the client, it has become apparent that there was something significantly wrong with last year's audit that was carried out by your firm. Your discussions with the manager of last year's audit indicate that the audit senior carried out the work on his own as the client is only small. The audit visit was one week and, at the end of the Friday of that week, the senior handed over the completed audit working papers to the manager. That Friday happened to be the last day of employment for the audit senior who had accepted a job with a circus, as CFO. It is clear to you that the audit file has recorded work that was not actually carried out. The file includes procedures that refer to documents that the client does not maintain and also includes explain[1]nations that do not correspond with what you now know to be the case. You suspect that the audit file from last year is an elaborate fiction. It looks like an audit file should and appears in all regards to be plausible; however, the details do not appear to correspond to the reality of the audit client. You are discussing with the audit manager how to proceed.

1. Discuss the significance of audit quality control and identify the likely outcome of the above.

2. How could the situation described above have been prevented?