Why is independence so essential for auditors

Assignment Help Accounting Basics
Reference no: EM132567206

Question - You are the audit partner of Simon & Co., a large audit firm that is operating in Melbourne. Your firm audited ABC Ltd, a custom-made products manufacturing company. ABC Ltd declared bankruptcy within six months of receiving an unqualified auditor's opinion on its financial statements for the year ended 31 December 2018.

The XYZ bank initiated a court challenge against your firm on the grounds that the bank disbursed a $2,500,000 loan to ABC Ltd in May 2019, but ABC went bankrupt shortly afterwards. The plaintiff alleged that your firm's 2018 audit of ABC was deficient and argued that the auditors failed to uncover that the value of ABC's inventories were substantially lower than reported on the balance sheet. Your audit firm did not issue privity letters to any third party in the past four years.

Required -

a. With reference to the principles established in common law, explain whether the XYZ bank is likely to be successful.

b. What are the legal requirements that a third party has to satisfy to successfully sue an auditor for negligence?

c. Why is independence so essential for auditors? Explain the difference between independence in appearance and independence in fact.

Reference no: EM132567206

Questions Cloud

Upward at constant velocity from the ground : How long will it take a 7.45 hp motor to lift a 289 kg beam directly upward at constant velocity from the ground to a height of 48.7 m?
How the goal will be measured using evidence-based hrm : Identify an organizational-level goal that would be incorporated into an annual business strategy (e.g., financial performance, service, productivity.
Independent experimental design and paired design : Describe the difference between an independent experimental design and a paired design.
Prepare packaging process account : Prepare packaging process account. Losses in cooking and packaging processes are detected upon completion in each process. Any further losses or gains
Why is independence so essential for auditors : Why is independence so essential for auditors? Explain the difference between independence in appearance and independence in fact
How did each development influence american culture : Select and complete one of the following assignment options to explain the formative influence of mass media on American culture.
Mathematical meanings of the slope and the y-intercept : Write the statement that describes the relationship between the net torque acting on the disk and its angular acceleration.
Coefficient of static friction between the block : A 4.53-kg block rests on a 17° incline as shown in the figure. If the coefficient of static friction between the block and the incline is 0.41
What are the advantages and disadvantages of social media : For this assignment, you can use your current social media accounts, or create new ones, as you reflect on the significance of the Internet and social media.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How expenditures are controlled in the general fund

In general terms, compare and contrast how expenditures are controlled in the general fund and in debt service funds. Explain why differences would occur.

  Show the impact ofthe inventory write down on the accounting

Show the impact of the inventory write-down on the accounting equation, and also show the journal entry that should have been recorded on December 31, 2004. Calculate (a) the Inventory balance that should have been reported on December 31, 2004, and ..

  Rhonda can transfer property that selecthashas notcorrect 1

rhonda owns 50 of the stock of peach corporation. she and the other 50 shareholder rachel have decided that additional

  Why does viz seem to indicate otherwise

Why does viz seem to indicate otherwise? Investigate flights over time in more detail to determine why these yearly numbers show such drop.

  Adjusted trial balance amount

If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is:

  Prepare all necessary elimination entries

Prepare all necessary elimination entries for the consolidating worksheet of December 31, 20X1. Complete the consolidating worksheet for December 31, 20X1

  How the money laundering scheme was executed

The "Hammer" Gets Hammered. In 2010, Tom DeLay, former Texas Congressman and U.S. House Majority Leader, was convicted of money laundering and sentenced.

  Prepare a schedule to determine the incremental cost or

a company manufactures an electric motor that is uses inseveral of its porducts. management is considering whether to

  A seasoned senior auditor at a large cpa firm

You are a seasoned senior auditor at a large CPA firm. Assurance and attestation services are an important part of your firm's business. You have been assigned a new, inexperienced staff member to mentor, train, and make a part of the audit team y..

  The cash flow on total assets ratio reflects the companys

1.business activities that either generate or use cash are classified as operating investing or financing activities on

  Comment on inherent limitations of the financial statements

Comment on the inherent limitations of the financial statements of this church, or any comparable not-for-profit organization

  Compute the cost of goods manufactured

Using the following data from both Garcon Company and Pepper Company for the year ended December 31, 2019, compute (1) the cost of goods manufactured

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd