1. Introduction 2 2. Importance of audit 2 3. Who can be the auditor 3 4. Why Vincents Ltd should carry out the audit of P & M Pty Ltd? 3 4.0 Company Profile. 3 4.1 Advertising 4 5. Propose Audit fee 4 6. Conclusion 4
The purpose of this report is to analyse the given case study and make a desicion on main issues regarding auditing of the company. There is a situation where Mary and Peter’s parthnership has been converted into P&M Pty Ltd; hence, their financial statements needs to be audited. Shareholders of P&M are not sure who can assess the company and whether the audit is needed. Vincents Ltd is a well established financial auditing firm with a diverse range of clients and it is offering its services to the above company.
Futher disscussion will include the importance of audit, the qualifying condition of the external audit in P&M Pty Ltd in detail and why Vincents Ltd is shareholders’ best choice. The proposition of audit fee is also included. 2. Importance of audit
Mostly all shareholders require an assurance on management behaviour and assertions that they make in financial reports. This is the primary function of external auditors; that is to provide credibility to the financial information that stakeholders need to make sound business decisions.
According to the Corporations Act 2001 (ss292-306), directors must prepare a financial report to give a true and fair view. Also companies must have their reports audited every year under law s301. Following that, P & M Pty Ltd being a company should follow the relevant legislation and have their reports audited externally.
It is important for the company to show that their financial reports provide a true and fair view and comply with accounting standards. Independent auditor opinion is crucial in order to show that those requirements are full field under ss296- 297.
Apart from that, auditor opinions help to improve the performance of the company. Recommendations made by auditor are significant in order to improve the efficiency and effectiveness of operations and gain a positive influence on employees whose work was checked.
3. Who can be the auditor
Vincents Ltd is able to carry out an audit of a company under s 1280 of the Corporations Act 2001, as we meet the following criteria: * Be ordinary resident in Australia * Be a member of approved accounting body * Be a graduate of a prescribed university or other prescribed institution in Australia, and have passed a course in accounting and commercial law acceptable to ASIC * Have sufficient auditing experience * Be a fit and proper person
The key characteristic of an audit is that an auditor must be independent under APES 110.290 – Requirements for assurance engagement. According to the Code of Ethics all main values will be fullfield in Vincents Ltd work.
Unfortunately, Wendy is not able to audit the company because she is not a member of approved accounting body, she doesn’t have an appropriate education and sufficient experience in auditing. Further more, main values and ethics won’t be satisfied under APES 110-290 if she does an audit , because of her family relationships and shares within the company. 4. Why Vincents Ltd should carry out the audit of P & M Pty Ltd? 5.0 Company Profile.
We aim to provide an exceptional service and maintain confidentiality of the information during the audit. Vincents Ltd has log books for all of our auditors demonstrating all of our experience and they have been certified by the RCA.
We provide an external audit of financial reports as well as other accounting