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Auditing - Practice Question Bank 1-6
Auditing - Practice Question Bank 1-6
Thus, Mr Shamsuddin can accept a discount offer provided he ensures compliance to the above.
ii. “Chartered Accountants in practice should be careful not to quote fee lower than that charged
by the chartered accountants in practice previously carrying out the audit unless scope and
quantum of work materially differs from the scope and quantum of work carried out by the
previous auditor.”
Keeping in view of the above, it is not advisable for Shamsuddin to accept the audit unless the
reduction in fee is on account of the reason of less work required to be performed due to
decrease in company’s business.
iii. As per the Code of Ethics for Chartered Accountants, issued by ICAP, the professional fees
should not be contingent upon the findings or results of such services.
Condition imposed by Design Limited impairs the objectivity of the auditor on account of self‐
interest threat. Therefore, Shamsuddin should not accept such a proposal.
iv. Being a sole proprietorship the existing and proposed auditors should immediately
communicate the fact to ICAP and the proposed auditor should not accept the offer without
clearance from ICAP and the existing auditor.
12. The following three entities have approached Alpha & Company, Chartered Accountants (the firm)
for appointment as their statutory auditors. In each case there are following issues which need to
be considered before the firm decides to accept the assignments.
i. Client: Safe Bank Limited
Issue: the firm has acquired office equipment from the bank under finance lease arrangements.
In addition, some partners of the firm are also using the bank’s credit card facility.
Required: In each case specify the minimum conditions specified by Companies Ordinance, 1984,
which should be fulfilled in order to accept the audit engagement.
i. The firm is not qualified for appointment as auditor of Safe Bank because it is indebted to the
bank.