1i) Explain the duties of auditors

Auditors have several key duties, including:

Financial Statement Examination: Auditors review a company's financial statements to ensure

they accurately represent the financial position and performance of the organization.

Verification of Records: They examine financial records, transactions, and supporting

documents to verify their accuracy and compliance with accounting standards and regulations.

Risk Assessment: Auditors assess the risks faced by the organization, including financial,
operational, and compliance risks, to determine the focus areas of the audit.

Internal Control Evaluation: Auditors evaluate the effectiveness of internal controls established
by the company to ensure reliable financial reporting and safeguarding of assets.

Fraud Detection: While not their primary responsibility, auditors are vigilant for signs of fraud or
irregularities during their examination and are required to report any suspicious findings.

Reporting: After completing their examination, auditors prepare a report summarizing their
findings, including any issues identified, recommendations for improvement, and their opinion
on the fairness of the financial statements.

Independence and Objectivity: Auditors must maintain independence and objectivity throughout
the audit process to ensure impartiality and credibility of their findings.

Overall, auditors play a crucial role in providing assurance to stakeholders that the financial
information presented by an organization is reliable and trustworthy.

1a) Explain the responsibility of an auditors

Auditors have several core responsibilities, including:

Examine Financial Statements: Auditors review financial statements to ensure they accurately
reflect the financial position, performance, and cash flows of the entity in accordance with
accounting standards and regulations.

Verify Financial Records: They verify the accuracy and completeness of financial records,
transactions, and supporting documentation to ensure compliance with applicable laws and
regulations.
Assess Internal Controls: Auditors evaluate the effectiveness of internal controls established by
the organization to ensure reliable financial reporting, safeguarding of assets, and compliance
with laws and regulations.

Identify Risks: Auditors assess risks faced by the organization, including financial, operational,
and compliance risks, to determine the scope and focus of the audit.

Detect Fraud and Errors: While not their primary responsibility, auditors are vigilant for signs of
fraud, errors, or irregularities during their examination and are required to report any suspicious
findings.

Report Findings: After completing their examination, auditors prepare a report summarizing their
findings, including any issues identified, recommendations for improvement, and their opinion
on the fairness of the financial statements.

Maintain Independence: Auditors must maintain independence and objectivity throughout the
audit process to ensure impartiality and credibility of their findings. This independence is crucial
for maintaining public trust in the audit profession.

Overall, auditors play a critical role in providing assurance to stakeholders that the financial
information presented by an organization is reliable, transparent, and compliant with applicable
standards.

1i)Explain the concept of independence of an auditor

1ii)The concept of independence for auditors refers to their ability to perform their duties
objectively and impartially, free from any undue influence or bias. Independence is crucial
because it ensures the integrity and credibility of the audit process. Here's why independence is
important:

Impartiality: Independent auditors are unbiased and can provide an objective assessment of the
financial statements and internal controls of an organization. This impartiality helps ensure that
the audit findings accurately reflect the true financial position and performance of the entity.

1ii) Public Confidence: Stakeholders, such as investors, creditors, and the general public, rely
on auditors
Auditors use various tools and techniques to conduct audits effectively. Some of the key tools of
audit include:
Audit Software: Auditors often utilize specialized audit software to automate processes such as
data analysis, sampling, and testing. These tools can streamline the audit process, improve
accuracy, and enhance efficiency.

Sampling Methods: Auditors employ sampling methods to select a representative subset of data
for examination when it's impractical or too costly to review every transaction or record.
Common sampling methods include random sampling, systematic sampling, and stratified
sampling.

Analytical Procedures: Auditors use analytical procedures to evaluate financial information for
consistency, trends, and relationships that may indicate potential issues or risks. These
procedures involve comparing current data with historical data, industry benchmarks, or
expectations based on the auditor's knowledge of the business.

Checklists and Audit Programs: Checklists and audit programs provide auditors with structured
guidelines and procedures to ensure all relevant areas are examined during the audit. These
tools help maintain consistency and completeness in the audit process.

Documentation Templates: Auditors rely on documentation templates to record their findings,

observations, and conclusions throughout the audit engagement. Standardized templates
ensure uniformity in documentation and facilitate communication with stakeholders.

Interviews and Inquiry: Auditors conduct interviews and make inquiries with management,
employees, and other relevant parties to gather information, clarify issues, and obtain
explanations for unusual transactions or discrepancies identified during the audit.

Observation: Auditors may observe internal control procedures, business operations, and
physical inventory counts to assess their effectiveness and identify potential weaknesses or
areas for improvement.

External Confirmations: Auditors may send confirmation requests to third parties, such as
customers, suppliers, or financial institutions, to independently verify the accuracy and validity of
transactions and account balances.

These tools help auditors gather evidence, assess risks, and form conclusions about the
fairness and reliability of the financial statements and internal controls of an organization. Each
tool serves a specific purpose in the audit process and contributes to the overall effectiveness
and efficiency of the audit engagement.
Explain the advantages of audit approaches and disadvantages

1iv) here are the advantages and disadvantages of different audit approaches:

Risk-Based Approach:
Advantages:

Efficient allocation of resources: Focuses audit efforts on areas with the highest risk of material
misstatement, optimizing resource utilization.
Enhanced audit quality: Increases the likelihood of identifying material misstatements, leading to
more reliable audit opinions.
Increased responsiveness: Allows auditors to adapt their procedures to changing risk profiles
throughout the audit engagement.
Disadvantages:

Subjective risk assessment: Risk evaluations may be subjective and influenced by auditor
judgment, leading to potential biases.
Limited scope: May overlook risks that are not adequately assessed or identified during the risk
assessment process.
Increased documentation requirements: Requires comprehensive documentation of risk
assessment procedures and conclusions to support the audit approach.
Substantive Testing Approach:

Ivb) Advantages:

Comprehensive examination: Provides detailed scrutiny of financial statement items, enhancing

the likelihood of detecting errors or irregularities.
Independent verification: Relies on objective evidence obtained directly from financial statement
items, reducing reliance on management representations.
Applicability to all audit engagements: Suitable for audits of entities with weak or ineffective
internal controls.
Disadvantages:

Time-consuming: Requires extensive testing of individual transactions and account balances,

potentially increasing audit time and costs.
Limited reliance on controls: Does not assess the effectiveness of internal controls, increasing
the risk of overlooking control deficiencies.
Inefficiency for low-risk areas: May involve unnecessary testing in areas with low inherent risk,
leading to inefficient resource allocation.
Controls-Based Approach:

Ivb) Advantages:

Efficiency gains: Allows auditors to rely on effective internal

Vi1) the difference between a permanent audit file and a current audit file!

A permanent audit file contains information that is relevant to multiple audit engagements over
time. It includes items such as the company's organizational structure, accounting policies, and
historical financial statements. The permanent audit file is updated periodically and serves as a
reference for future audits.

On the other hand, a current audit file contains information specific to the current audit
engagement. It includes the current year's financial statements, audit planning documents,
working papers, and any other relevant documentation related to the current audit. The current
audit file is created and maintained for each individual audit engagement.

The permanent audit file provides a historical perspective and helps auditors understand the
company's background and trends, while the current audit file focuses on the specific
procedures and findings of the current audit engagement.

Both files are important for auditors to ensure consistency, continuity, and efficiency in their audit
work.
the difference between a permanent audit file and a current audit file!

A permanent audit file contains information that is relevant to multiple audit engagements over
time. It includes items such as the company's organizational structure, accounting policies, and
historical financial statements. The permanent audit file is updated periodically and serves as a
reference for future audits.

On the other hand, a current audit file contains information specific to the current audit
engagement. It includes the current year's financial statements, audit planning documents,
working papers, and any other relevant documentation related to the current audit. The current
audit file is created and maintained for each individual audit engagement.

The permanent audit file provides a historical perspective and helps auditors understand the
company's background and trends, while the current audit file focuses on the specific
procedures and findings of the current audit engagement.

Both files are important for auditors to ensure consistency, continuity, and efficiency in their audit
work.

2i) Defined professional ethics: Professional ethics refers to the moral principles and standards
that guide the behavior and conduct of professionals in their respective fields. It involves
adhering to a set of values and principles that promote honesty, integrity, objectivity,
confidentiality, and professionalism.

In the context of auditing, professional ethics are crucial for auditors to maintain independence,
exercise professional skepticism, and perform their duties with integrity. This includes:
1. Independence: Auditors must remain independent and avoid any conflicts of interest that
could compromise their objectivity and impartiality. They should be free from any undue
influence that may impair their judgment.

2. Objectivity: Auditors should approach their work with impartiality and without bias. They must
evaluate evidence objectively and form conclusions based on facts and professional judgment,
rather than personal opinions or external pressures.

3. Confidentiality: Auditors have a duty to protect the confidentiality of client information

obtained during the audit process. They should not disclose or use such information for
personal gain or in a manner that could harm the client's interests.

4. Professional Competence and Due Care: Auditors should possess the necessary knowledge,
skills, and expertise to perform their work competently. They should stay updated with relevant
professional standards, regulations, and industry practices. Additionally, auditors should
exercise due care by applying professional judgment and diligence in planning, executing, and
reporting on the audit.

These are just a few key aspects of professional ethics in auditing. Adhering to these principles
helps maintain the integrity and credibility of the auditing profession.

2ii) explain the need for professional ethics

Professional ethics are important because they help guide individuals in making ethical
decisions and behaving ethically in their professional roles. They provide a framework for
maintaining trust, integrity, and accountability in various fields, ensuring that professionals act in
the best interests of their clients, colleagues, and society as a whole. By following ethical
principles, professionals can uphold their reputation, build strong relationships, and contribute to
a more ethical and responsible work environment.

2iii) Explain an auditor, responsibilities to profession, college, and society. They play a crucial
role in upholding the integrity of financial reporting and ensuring that businesses comply with
laws and regulations. By conducting independent and objective audits, auditors help maintain
the trust and confidence of investors, stakeholders, and the public in the financial markets. Their
work contributes to the overall transparency and accountability of organizations, which is
essential for the smooth functioning of the economy. Additionally, auditors also have a
responsibility to their profession by continuously updating their skills and knowledge, adhering to
professional standards, and promoting ethical behavior within the auditing profession.

4i) State the general procedure for appointing an auditor. Here's how it typically works:
1. Selection: The first step is for the organization or company to select a suitable auditor. This
can be done through a thorough evaluation of potential auditors based on their qualifications,
experience, reputation, and expertise in the relevant field.

2. Proposal: Once a potential auditor is identified, the organization or company may request a
proposal from the auditor. The proposal usually includes details such as the scope of the audit,
the timeline, the fees, and any specific requirements or expectations.

3. Engagement Letter: If the organization or company is satisfied with the auditor's proposal,
they will enter into an engagement letter or contract. This document outlines the terms and
conditions of the audit engagement, including the responsibilities of both parties, the
agreed-upon scope of work, and the fee structure.

4. Planning: After the engagement letter is signed, the auditor and the organization or company
will collaborate to plan the audit. This involves understanding the organization's operations,
identifying key risks, determining the audit objectives, and developing an audit plan and
timeline.

5. Fieldwork: The auditor will then conduct fieldwork, which involves gathering evidence,
performing audit procedures, and testing the organization's internal controls and financial
transactions. This step is crucial for assessing the accuracy and reliability of the organization's
financial statements.

6. Reporting: Once the fieldwork is completed, the auditor will prepare an audit report. This
report includes the auditor's opinion on the fairness and accuracy of the financial statements,
any significant findings or issues identified during the audit, and recommendations for
improvement, if applicable.

7. Communication: The final step is for the auditor to communicate the audit findings and report
to the organization's management, board of directors, or other relevant stakeholders. This
ensures transparency and allows the organization to take appropriate actions based on the
audit results.

It's important to note that the specific procedure for appointing an auditor may vary depending
on the jurisdiction, industry, and organizational requirements. Professional standards and
regulations also play a role in guiding the appointment process.

4ii) The procedure To remove an auditor, the procedure typically involves the following steps:

1. Resolution: The first step is for the organization or company to pass a resolution at a general
meeting or a board meeting. The resolution should be in compliance with the applicable laws,
regulations, and the company's articles of association.
2. Notice: Once the resolution is passed, the organization or company must provide written
notice to the auditor about their intention to remove them. The notice should include the reasons
for the removal and the effective date of the removal.

3. Special Notice: In some cases, a special notice may be required to be given to the auditor.
This notice informs the auditor of the intention to remove them and must be sent to the
registered address of the auditor.

4. Extraordinary General Meeting: The organization or company may need to call an

extraordinary general meeting (EGM) to discuss and vote on the removal of the auditor.
Adequate notice of the EGM should be given to the members or shareholders as per the legal
requirements.

5. Voting: At the EGM, the members or shareholders will vote on the resolution to remove the
auditor. The resolution is typically passed by a simple majority or as per the specific
requirements mentioned in the company's articles of association or applicable laws.

6. Filing: After the resolution is passed, the organization or company must file the necessary
documents with the appropriate regulatory authorities, such as the company registrar or
governing body, to officially remove the auditor from their records.

It's important to note that the specific procedure for removing an auditor may vary depending on
the jurisdiction, the type of organization, and the applicable laws and regulations. It is advisable
to consult legal and professional experts to ensure compliance with the specific requirements in
your situation.

4iii) To fix or determine the auditing remuneration, the procedure typically involves the following
steps:

1. Evaluation: The organization or company evaluates the scope of the audit work required,
taking into account factors such as the size, complexity, and industry of the organization.

2. Proposal: The organization or company requests proposals from auditing firms. These
proposals outline the services to be provided, the estimated time and resources required, and
the proposed remuneration.

3. Negotiation: The organization or company reviews the proposals and negotiates with the
auditing firms to determine the remuneration. This may involve discussing the scope of work,
the level of expertise required, and any additional services or special considerations.

4. Agreement: Once the organization or company and the auditing firm reach an agreement on
the remuneration, a formal agreement or engagement letter is drafted and signed by both
parties. This document outlines the agreed-upon remuneration, payment terms, and other
relevant details.

5. Approval: The remuneration agreement may need to be approved by the appropriate

authorities within the organization or company, such as the board of directors or the audit
committee.

It's important to note that the procedure for fixing auditing remuneration may vary depending on
the jurisdiction, the specific industry, and the regulations governing auditing practices. It is
advisable to consult with legal and financial professionals to ensure compliance with the
applicable laws and regulations in your situations

4iv) explain the difference between the qualifications of an auditor and an accountant. While
both roles are related to financial matters, there are some distinct differences in their
qualifications.

An auditor is responsible for examining and evaluating an organization's financial records,

systems, and processes. They ensure that the financial statements are accurate, complete, and
in compliance with applicable laws and regulations. To become an auditor, one typically needs
to obtain a professional certification such as the Certified Internal Auditor (CIA) or Certified
Public Accountant (CPA).

On the other hand, an accountant focuses on the preparation, analysis, and interpretation of
financial records. They handle tasks such as bookkeeping, financial reporting, tax planning, and
budgeting. Accountants may have various professional qualifications, such as Certified
Management Accountant (CMA) or Chartered Accountant (CA).

While both auditors and accountants work with financial information, auditors primarily ensure
the accuracy and integrity of financial statements, while accountants handle the day-to-day
financial operations and reporting.

It's important to note that the specific qualifications and requirements for auditors and
accountants may vary depending on the jurisdiction and the professional standards set by
relevant accounting bodies.

5i) Defined internal control: internal control is the whole control put by management to secure
the whole assets of an organization
5ii) Defined internal audit : Internal audit is like having an internal detective squad within an
organization. They conduct independent and objective evaluations to ensure things are running
smoothly. They assess the effectiveness of risk management, control, and governance
processes. Internal auditors help identify areas for improvement and provide recommendations
to enhance operations and compliance. It's all about keeping things in check and ensuring the
organization is on the right track!

5iii) Defined internal check: An internal check refers to the system of controls and procedures
that an organization puts in place to ensure the accuracy, reliability, and integrity of its financial
and operational processes. It involves the segregation of duties, regular monitoring of activities,
and the implementation of checks and balances within the organization. The purpose of an
internal check is to detect and prevent errors, fraud, and inefficiencies, safeguard assets, and
promote the efficient and effective functioning of the organization. It's like having an internal
system of checks and balances to ensure everything runs smoothly.

5iv) What are the significance of an audit assignment: Audit assignments are pretty important
for a few reasons. First, they help ensure the accuracy and reliability of financial statements by
examining and verifying the organization's records. This is crucial for stakeholders like investors,
lenders, and regulators who rely on these statements to make informed decisions. Second,
audits can uncover any potential fraud, errors, or irregularities within the organization, helping to
protect its assets and reputation. Lastly, audit findings and recommendations can provide
valuable insights to management, helping them improve processes, mitigate risks, and enhance
overall performance. So, audit assignments play a key role in maintaining transparency,
accountability, and trust in the business world!

5v) Explain The characteristics of internal audit function: internal audit function has several key
characteristics. It is an independent and objective activity that assesses and evaluates an
organization's internal controls, risk management processes, and governance. Internal auditors
provide assurance to management and the board of directors regarding the effectiveness and
efficiency of operations, the reliability of financial reporting, and compliance with laws and
regulations. They are also responsible for identifying areas of improvement and making
recommendations to enhance the organization's processes and controls. Internal auditors have
a broad scope, covering various areas of the organization, and they maintain a high level of
professionalism, ethics, and integrity in their work.
5vi) Explain The characteristics of internal control questionnaire: internal control questionnaire,
is a tool used to assess the effectiveness of an organization's internal controls. It consists of a
series of questions that cover various control areas such as authorization, segregation of duties,
and safeguarding of assets. The questionnaire helps identify strengths and weaknesses in the
internal control system, allowing management to take corrective actions where needed. It's like
a checklist to ensure that all the necessary controls are in place to protect the organization's
resources and achieve its objectives.

5viii) Explain The significance of internal control system : internal control system is super
important, Philip! It helps organizations achieve their objectives by ensuring the reliability of
financial reporting, safeguarding assets, and promoting compliance with laws and regulations.
It's like having a set of checks and balances in place to prevent errors, fraud, and inefficiencies.
With a strong internal control system, organizations can have better operational efficiency,
reduce risks, and maintain the trust of stakeholders. It's like having a safety net that keeps
everything running smoothly and protects the organization's interests.

3i) Defined auditor liability Sure thing, Philip! Auditor liability refers to the legal responsibility and
potential financial consequences that auditors may face if they fail to meet their professional
obligations or if their actions result in harm or losses to their clients or other stakeholders. When
auditors perform their duties, they are expected to exercise due care, professional skepticism,
and follow generally accepted auditing standards.

If auditors make errors, omissions, or fail to detect fraud or material misstatements in financial
statements, they may be held liable for any resulting damages. This liability can include legal
claims, financial penalties, and reputational damage. However, it's important to note that auditor
liability is determined based on the specific circumstances, applicable laws, and contractual
agreements between the auditor and the clients.

3ii) Explain liability for negligent under common law .Negligence is defined as an act or omission
which occurs because the person concerned (e.g. an auditor) failed to exercise that degree of
reasonable skill and care which is reasonably to be expected in the circumstances of the
case.Negligence is a common law concept. It seeks to provide compensation to a person who
has suffered loss as a result of another person’s wrongful neglect. To succeed in action for
negligence, an injured party must prove 3 things:1. That a duty of care existed.2. The duty of
care was breached by the defendant(auditor) and 3. The breach caused the claimant (the
injured party) a pecuniary (financial) loss.As an appointed agent of shareholders, an auditor
must exercise reasonable care and skill in carrying out his duties as any breach of such duty will
occasion pecuniary harm to his principal –the shareholders.Some of the cases dealing with
auditors’ liability under contract include: Re London and General Bank (1895) Re Kingston
Cotton Mill (1896) The London Oil Storage Co. Limited v. Seear, Hasluck & co. (1904) Re
Westminster Road Construction and Engineering Co. Ltd (1932) McKesson and Robbins (1939)
Re Thomas Gerrard& Son (1968)

3iii)Explain the audit liability under status civil, criminal law Liability Criminal liabilities arise out
of statute. Under section 560 of CAMA, if any person in any return, report, certificate, balance
sheet or other document required for the purpose of any provisions of the Act, willfully makes a
statement that is false in any material particular, knowing it to be false, he is criminally held
liable and may be imprisoned (2 years), if convicted by a High Court or fined (N1,000), or 4
months imprisonment, if convicted by a lower court or both such fine and imprisonment. Under
sect. 436 of Nigerian Criminal Code, if any promoter, director, officer or an auditor of a company
makes, circulates, publishes or concurs in making, circulating of publishing of any statement or
account, false in any material particular, and intended to deceive or defraud, any person to
invest in such a company, he is guilty of felony and liable to 7 years imprisonment.Generally and
under various other statutes, auditors may be liable under criminal law if found guilty: Insider
dealing, since they are privy to inside information If they knew or suspected a client was
laundering money and they failed to report to the appropriate authority If found to be aiding and
abetting criminal activity. Arthur Andersen was found guilty for blocking investigation by
shredding vital documents in the case of Enron. Under insolvency/winding up of companies,
auditors may be found to be officers of the company and could be charged with criminal
offences or found liable for civil offences in connection with the winding up of the company (see
CAMA, sects. 502, 503). Criminal liability can also arise for offences relating to tax law.Civil
LiabilityCivil liabilities may arise under contract or in tort.Liability under ContractThe audit client,
the company has a contract with the auditor. A contract for the supply of service, such as audit,
has a duty of care implied in it by statute, that is, duty of care is automatic and needs no proof.
In a case of this nature only two elements need proving, namely: Whether the duty of care has
been breached and Whether any loss has arisen as a result of the breach.Sect. 368(1), CAMA
Cap C20, LFN 2004 states, “ A company’s auditor shall in the performance of his duties,
exercise all such care, diligence and skill as is reasonably necessary in each particular
circumstance.(2) Where a company suffers loss or damages as a result of the failure of its
auditor to discharge the fiduciary duty imposed on him by subsection (1) of this section, the
auditor shall be liable for negligence and the directors may institute an action for negligence.(3)
If the directors fail to institute an action against the auditor under subsection (2) of this section,
any member may do so a
3iv) Explain auditors protection against liability Auditors have certain protections against liability,
Philip. One of these protections is the concept of "reasonable assurance." Auditors are not
expected to provide absolute assurance or guarantee that financial statements are completely
free from error or fraud. Instead, they provide reasonable assurance based on their audit
procedures and professional judgment. Additionally, auditors can also include liability limitation
clauses in their engagement contracts, which define the extent of their liability in case of any
claims. However, it's important to note that auditors still have a responsibility to perform their
duties with professional care and within the boundaries of professional standards.