Assignment of Business Law

Topic: Audit Problems

Submitted To:
Sir Ilyas
Submitted By:
Basit Ali (18)
Abid ullah khan (12)
Shah Faisal (70)
Zubair Ahmad (69)
Shah Khalid (17)
Program: M.com
Semester: 3rd
Date: 12-02-2020
Quaid-e-Azam Commerce College

Interview Questions for Assignment

Interviewer: What is auditing?
Respondent: An audit is a systematic and independent examination of books, accounts, statutory records, documents and
vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and
fair view of the concern.

Interviewer: What is origin and evolution of auditing?

Respondent: Origin of Audit comes from the word “Audire” but the evolution of Auditing as a financial accountability field
in the advent of the Industrial Revolution.The word “AUDIT” has Latin origins (audio, audire, means listening). During the
time this word has known a lot of definitions and classifications. In general, it is a synonym to control, check, inspect, and
revise.

Interviewer: What are types of auditing?

Respondent: Different types of auditing are external audit, internal audit, forensic audit, statutory audit etc.

Interviewer: What is relationship in accounting and auditing?

Respondent: Accounting involves tracking, reporting, and analyzing financial transactions. ... An audit is an independent
examination of accounting and financial records and financial statements to determine if they conform to the law and to
generally accepted accounting principles.

Interviewer: What is the purpose of auditing books of accounts?

Respondent: Audit is an objective evaluation of the statements, which results in an audit opinion regarding whether the
statements have been presented fairly and in accordance with the applicable accounting framework (such as GAAP or IFRS).
This opinion greatly enhances the credibility of the financial statements with users, such as lenders, creditors, and investors.

Interviewer: What are the ideal qualities of auditors?

 Respondent:
1) Objectivity
2) Integrity
3) independence.
4) Confidentiality of client information.
5) Effective communication skills.
6) Tactful approach in dealing clients.
7) Clear headed ness and common sense
8) Analytical approach.
9) Practical approach.

Interviewer: Is there any role of religious inclination to the service quality of auditors?
Respondent: yes, religious aspect has contribution to the service quality of auditors, the stronger the religious beliefs and values the
greater will be the audit quality.

Interviewer: Do you agree that ethical behavior is needed for accountants and auditor?
Respondent: Yes, ethics require accounting professionals and auditors to comply with the laws and regulations that govern
their jurisdictions and their bodies of work avoiding actions that could negatively affect the reputation of the profession is a
reasonable commitment that business partners and others should expect.

Interviewer: What are the problems faced by internal auditors in organizations?

Respondent: The respondent identified the following problems faced by the internal auditor:
 lack of independence
 Lack of training
 Lack audit staff
 Lack of required resources
 Lack of support from the external auditor

Interviewer: What are the causes of problems of internal auditors?

Respondent: Following are main causes of problems faced by the internal auditor:
 Avoiding High-risk Areas or Quietly Accepting Scope Limitations
 Ignoring Organizational Culture
 Failure to Perform Follow-up
 Watering Down" Reportable Issues
 Failure to Provide Adequate Reporting About Internal Audit

Interviewer: What is the impact of issues faced by internal auditors?

Respondent: it reduces the quality of audit work which as a result leads to more mistakes and frauds in the company financial
statement and other related areas.

Interviewer: What are the problems faced by external auditors of organizations?

Respondent:
 Inadequate access to important information
 Inadequate support of internal audit
 Lack of knowledge about the nature of company
 Uncooperative client

Interviewer: What are the solutions to problems faced by external auditors?

Respondent:
  Independence Audit firms must be, and must be seen to be, independent in all circumstances.
 Audit performance Audits need to be more thorough. Audit fees need to reflect the realistic allocation of resources to
perform the audit.
 Management responsibility and accountability It is inappropriate to consider audit shortcomings without
emphasizing the ultimate responsibility of client management for the accuracy and completeness of the financial
statements.

Interviewer: What are the causes of problems of external auditors?

Respondent:
 Lack of knowledge about company nature.
 Lack of knowledge about company culture.
 Pressure from the company board of directors.
 Preferring personal interest.
 Incompetency

Interviewer: What is the impact of issues faced by external auditors?

Respondent: it leads to lower quality audit report as well as reduce the efficiency and effectiveness of management decisions
due to unrealistic report or position presented by the external auditor.

Interviewer: What is the feasible solution to the problems faced by external auditors?
Respondent:
 Do Your Homework.
 Identify the Primary Pain Point.
 Work in accordance with rules and regulation
 Follow steps necessary for a quality audit ( i.e. be honest, independent etc)
 Make Connections.
 Ensure Team Understanding.
 Expand Test Coverage.
 Scrutinize Control Design & Function
Interviewer: Is there any role of auditors’ independence in raising public confidence on accounting records?
Respondent: Credibility in this usage means that the financial statements can be believed, that is, they can be relied upon by
outsiders such as trade creditors, bankers, stockholders, government and other interested parties. Therefore, the need for
independence arises because in many cases users of financial statements and other third parties do not have sufficient
information or knowledge to understand what is contained in a company’s annual accounts. Thus, they rely on the auditor’s
independent assessment. Public confidence in financial markets and the conduct of public interest entities relies partly on the
credibility of the opinions and reports given by auditors in relation with financial audits.

Interviewer: How auditors help in controlling tax evasion?

Respondent: As auditor investigates company financial statement and one of these statement is profit and loss statement
which shows that whether the company have paid the due tax or not. So auditor can report any tax evasion to related regulatory
authorizes and through this way they can control tax evasion.

Interviewer: What is the role of internal and external auditors in promoting and controlling frauds and corruption in public
and private sector organizations?
Respondent: Auditors have an important role as they somehow the examiners of these sectors and this the duty of auditors to
control fraud and corruption in public and private sector. If they does not provide their duty in a professional manner the rate
of fraud and corruption will increase.

Interviewer: What is your opinion whether auditors in Pakistani context work for their personal or public interest or both?
Respondent: Professionally auditors must work in the public interest and in my opinion many auditors work in the public
interest but some of them work for their personal interest as well in the context of Pakistan.

Interviewer: What will happen if auditors do not fulfill their professional duties?
Respondent: In my opinion audit is the most important mechanism to eliminate risk of fraud and corruption which is a main
hurdle in the success and prosperity of a country but if auditors does not fulfill their professional duties fraud and corruption
will increase and no one will be held responsible.

Interviewer: Do auditor’s report corruption and embezzlement or generally remain silent on them?
Respondent: Many auditors report corruption and embezzlement but some of them remain silent as well.

Interviewer: Do some auditors provide accountancy and audit service parallelly to same organizations?
Respondent: Yes, some auditors do.

Interviewer: Is there any role of auditors in tax evasion? If yes, then how they make it possible?
Respondent: yes, there is a role of auditors in tax evasion. As auditor is an investigator of company financial statement and
one of these statement is profit and loss statement which shows that whether the company have paid the due tax or not. So the
management may intentionally avoid tax or may not pay the appropriate tax and here, the auditors can help by not showing
such evasion in the audit reports.

Interviewer: Anything else you would like to add about auditing?

Respondent: The work of an auditor sometimes is complex and demanding, but qualities such as having the required
experience, making independent decisions, good communication skills and understanding business needs can help you deliver
quality work that is not biased or compromised. If you have an interest in accounting, business and taxation laws, learning how
to become a dependable auditor becomes easier. Also, a strong character will ensure you remain competitive and your skills
highly sort in the market.