FORUM DESCRIPTION This is a post-first discussion Forum. Erica Gray, CPA, is a s
ID: 2513775 • Letter: F
Question
FORUM DESCRIPTION This is a post-first discussion Forum. Erica Gray, CPA, is a sole practitioner. She has been practicing as an auditor for 10 years. Recently a long-standing audit client asked additional Gray to design and implement an integrated computer based accounting information system. The fees associated with this h the client are very attractive. However, Gray wonders if she can remain objective on subsequent audits in her evaluation client's accounting system and its records if she was responsible for its design and implementation. Gray knows that professional in fact and appearance from her auditing clients Required 1. What do you believe auditing standards are mainly concemed with when they require 2. Why is it important that auditors remain independent of their clients? 3. Do you think Gray can accept this eng dent? Justify your responseExplanation / Answer
Ans to 1)
Auditing standards require auditors to remain independent in fact (in real sense) to enable auditors to maintain integrity and objectiveness. If Gray accepts the above mentioned engagement, she will practically design it and would not be able to check it as an independent outsider.
Auditing standards also require auditors to remain independent in appearance so that any informed third party can not assume that auditors have not performed their duties diligently. For example if Gray (also the auditor) implements the above system and misses to design control around the cash discount to be given to customers, the customers might think that it has been done intentionally which will compromise the very basis of getting the audit done.
Ans to 2)
Auditors remaining independent of their client in fact and in appearance is of utmost importance in order to enable them to maintain integrity and objectiveness. The client will not have any influence on their work/result, the auditors would be able to think neutrally without being perceptive, the third parties would not assume otherwise.
Ans to 3)
No, I do not think Gray can accept this engagement. An auditor can not design the system she is going to check without being compromised.
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