ACC331 Audit and Assurance Service

Question 1 Public perception of the 'Role of the Auditor' "The quality of auditing in Australia is under scrutiny by ASIC and the industry faces growing pressures" Walker, D. (2019). Auditing the Auditors. Australian Institute of Company Directors. Required Conduct an internet search for one (1) case in relation to a 'Big 4' Accounting Firm who has faced scrutiny, with respect to their audit findings in the last 2 years. With reference to the case (include a link to it within your submission) submit a report that:

1. summarises the facts of the case, including the company that the audit findings related to and the oversight/error by the auditor.

2. indicates the level of assurance provided and the nature of the evidence likely collected by the auditor to provide that level of assurance

3. evaluates the remedies sought by regulatory agencies. 

4. evaluates the remedies sought by the company's stakeholders.

5. discusses the challenges and available opportunities for audit firms in offering assurance services in a post-Banking Royal Commission / increased regulatory environmentQuestion 2 Legal liability  As Price Young Andersen's audit manager for the ABC Pet Food Ltd (ABC) audit, you were very satisfied with the seamless completion of the audit for the year ended 30 June 2019. On 5 Jan 2020, your audit partner tells you that ABC has gone into liquidation. It appears that the Finance Director was diverting company funds into a Cayman Island bank account and has fled the Country. The lawyers for ABC are taking action against the audit partner of Price Young Andersen's for not performing an appropriate audit. They believe that a properly conducted audit should have detected such a fraud. You explain to the partner that the audit was performed in accordance with all auditing standards and nothing was found to arouse suspicion during the audit. There was nothing unusual noted within the audit, which took the same amount of time as last year’s. All applicable work steps were performed. Your work was reviewed by the audit director, and the entire file was reviewed by the audit partner. Despite the nature of the fraud, It was likely that the fraud was undetected, as it fell below materiality levels set within the audit planning phase. The Price Young Andersen's audit partner remains concerned. He contacts another audit partner in the same firm, who operates in a separate jurisdiction, to ask them to review the ABC audit file and findings. The other partner agrees to the peer-review process. The outcome of the peer-review is that the audit has been completed satisfactorily/performed properly. The audit partner would like you to report to him on the potential legal case ABC could make and the likely outcome. Required With reference to relevant auditing standards, case law (inc. tort of negligence):

1. Discuss whether your audit firm has acted with reasonable care and skill.

2. Provide an explanation as to how the lawyers for ABC might present the case against the auditor, including reference to case law.

3. If the partner is convinced that they acted with reasonable care and skill, explain why the audit partner may still offer ABC a significant settlement amount.