Discuss the audit problems related to Matatizo

Reference no: EM132850302

Question - You are newly appointed senior auditor at Matatizo and Partners Auditing Firm. Upon your report to the job you discover the following information regarding the company:

The company have been established two years ago by three friends Matatizo, Malalamiko and Visingizio who are the Partners of the auditing firm. Matatizo, who is the named partner of the firm is the managing partner of the firm while Visingizio and Malalamiko are Shadow/Silent Partners. All of them have graduated with a diploma in accounting and have completed their Certified Public Accountant (CPA) certification. Your co-workers consist of five (5) junior auditors who hold a diploma in accounting and are fresh from school, two (2) senior auditors who hold an advance diploma in accounting and two (2) secretaries with an Ordinary Level Certification.

In the last two years, the company has been carrying out some small audit assignments and it is currently in the process of expanding itself in increasing its client base. In light of this, the company is in process of tendering for Three (3) different types of assignments to be carried out in the coming twelve (12) months. The first call is for the Audit of Machame Bank who are requesting for an expression of an opinion to audit their annual financial statements. The second is on auditing interim report of Z&Z insurance companies and performing a general assessment on the possibility of introducing life insurance among its products. The last is from Malumbano Company who are requesting for an expression on interest in providing tax consultation. Your company have assured you that they are capable of undertaking all of these assignments at go.

The company neither document their auditing processes nor planning and risk assessment.

Upon the discussion with your co-workers you are informed that each audit has its approach, there is no need to document as it has no later used. Moreover, you are informed that the risk assessment is done while conducting the auditing assignment and, in many events, the firm always chooses to rely upon the internal control system of the organisation if it exists and only performs substantive audit when the company does not have an internal control system.

At present, the company has no quality assurance partner, and nothing has been done to observe the quality of the audit work done by the firm. You are bit concern regarding this and you are interested in discussing with Mr Matatizo regarding the problem of not having a quality control system in place in the firm and the different tools that can be used to ensure high-quality service is provided by the auditing firm.

In the last two years, the company has been appointed as an external auditor of Matazamio Company. In the past two years, the company has been advising the company including preparing and auditing its financial statements. Matazamio Company is a sister company of Matatizo, as it is established by the same partners and it is currently managed by Mr Malalamiko. According to the audit contract, Matatizo is expected to indefinitely provide auditing and consultation services to Matazamio company. Current, Matazamio is the only client bringing large consultation fees to the audit firm.

Moreover, the company is in process of trying to advertising itself to obtain more customers.

They are in a dilemma on which advertisement tool should be used by them which can not jeopardise their profession. During the interview, you were requested to think of ways through which the company can advertise itself and get more clients. As it is part of your assignment you are considering discussing with the management on how they can advertise themselves.

The following information has been collected by you in a course of one week after being employed at Matatizo and Partners Auditing Firm:

It is highly likely that Matatizo will win the Machame Bank bid due to the amount of cost the auditing company have charged for the auditing assignment. The company have charged a minimum cost for the tender and they expect to gradually increase the charge in the future. This information has not been communicated to Machame Bank.

Z&Z insurance company is currently under the observation by the court for poor treatment of its customers and employees. Your auditing firm is aware of this and has assessed the risk to be minor for the overall operation of the company and in an event your firm win the bid, this risk will be ignored during the audit.

Given the information in the above case:

1. Discuss the audit problems related to Matatizo and Partners Auditing Firm and its Clients.

2. As a new addition to the company, discuss what advise will you give to them concerning the functioning of an auditor and auditing firm?

Reference no: EM132850302

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