Reference no: EM133334493

Assignment: Assume that you are responsible for preparing an audit plan in each of the following three independent situations:

1. Management of your client precision components Ltd informs you that during the year the interval
Auditors discovered that a substantial amount of inventory had disappeared from one of its small
Branches. A number of local managers have subsequently resigned, although there were no prosecutions. The losses amount to 3% of the company's operating profit.

2. A new competitor for your client Perspex barriers Ltd entered the market two months before the balance sheet date, and since that time, selling prices have fallen significantly. Your enquires have revealed that the industry expects heavy discounting to continue for the whole of next year.

3. Your client formidable Ltd established an internal audit department in the second quarter of the year, consisting of four staff. The chief internal auditor is a former big four audit manager with 15 years experience in the profession. He reports directly
To the managing director and he has no internal audit experience. Since joining the company, he has spent most of his time examining the internal control systems of the company. He is assisted by two new graduates and another staff member who has two years of internal audit experience and is presently in her third year of a part time bachelor of accounting degree

Question: What are three conditions as required by the ethical and auditing standards that an audit firm must adhere to before it can undertake new engagements or continue existing audit engagements