introduction to audit and other assurance services

OUTLINE OF PRESENTATION

•Introduction
•Auditing Defined
•Characteristics, purpose, objectives, advantages and limitations of audit
•Qualification of an Auditor
•Appointment and remuneration of Auditor(s)
•Appointment
•Remuneration (Section 140)
•Removal of Auditor(s)
•Functions of an Auditor
•Auditor to avoid conflict of interest (Section 143)
•Ethics and the Professional Accountant
•Consequences of unethical behaviour
•References
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Introduction
Chartered Accountants offer a wide range of professional services to their clients including audit, review, other assurance and related
services. These services are regulated with many jurisdictional requirements (such as Companies Act in the case Ghana) with national
and international standards such as the Internal Standards on Auditing (International Federation of Accountants [IFAC]). All these
services ensure the achievement of organizational objectives (maximization of shareholder’s wealth or other defined objectives).

Auditing Defined
Auditing is the examination of books of accounts and vouchers of business, as will enable the Auditors to satisfy himself that the
balance sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business and that the profit and loss
account gives true and fair view of the profit or loss for the financial period, according to the best of information and explanation given
to him and as shown by the books; and if not, in what respect he is not satisfied (Spicer & Pegler, 1985).

In other words, auditing is the examination of records by an Auditor with the view to express an opinion on the truth and fairness of
the financial statements (Okyere, 2016).

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Explain the following:
1.Characteristics of audit?
2.Purpose of audit?
3.Objectives of audit
4.Advantages of audit
5.Limitations of Audit?

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Qualification of an Auditor
A person shall qualify for appointment as an auditor of a company (public or private) only if he is,  
(a)qualified and licensed in accordance with the Chartered Accountants Act 1963, Act 170, and
(b)is not disqualified under subsection (2) of section 138 of Act, 2019 (Act 992).

Section 138 (2) states that a person shall be disqualified for appointment as an auditor under the following circumstances:
(a)If the person is an officer of the company or an officer of associated company.
(b)If the person is a partner of or in employment of an officer of the company or of any associated company.
(c)If the person is an infant (person less than 21 years).
(d)If the person is of unsound mind (this pronouncement must be made by a court of competent jurisdiction)
(e)If the Auditor is a body corporate, except that a partnership firm may be appointed, in the name of a firm, as auditors of a company.
A body corporate is a legal entity identified by a particular name.
(f)A person who is convicted of indictment, whether in Ghana or elsewhere, or of any offence involving fraud or dishonesty or any
offence in connection with the promotion, formation or management of a body corporate.
(g)An undischarged bankrupt;
(h)A person who is for the time being disqualified from acting as an Auditor of a company by instrument of the Registrar of
Companies.
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Appointment and remuneration of Auditor(s)
Refer to Sections 139 and 140 of the Ghana Companies Act 2019, Act 992

Removal of Auditor(s)
Refer to Section 141 of the Ghana Companies Act 2019, Act 992

Functions of an Auditor
(a)An auditor of a company while acting in the performance of functions under this Act, is not an officer or agent of the company, but;
 stand in fiduciary relationship to the members of the company as a whole,
 shall act in such manner that is faithful, diligent, careful and ordinarily skilful auditor would act in the circumstances,
(b)The Auditor shall have the right of access at all time to the books and accounts and vouchers of the company and shall be
entitled to require from all officers such information and explanation he thinks necessary for the performance of his
duties.
(c)The Auditor shall have the right to receive all notices of general meeting and attend any general meeting.
(d) The Auditor shall have the right to apply to the court for direction in relation to any matter in connection with the
performance of his duties.
(e) Before accepting appointment as Auditor of a company the Auditor shall communicate with the retiring Auditor and invite
him to make any representation and supply any information which he may care to supply.
(f) The Auditor who is to be removed shall have the right to be heard at the said annual general meeting.

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Auditor to avoid conflict of interest (Section 143)
1. Section 143(1) states that the personal judgement of the auditor shall not be impaired by reason of any relationship with or interest
in the company or any of the subsidiaries of the company.
2. Without limiting subsection (1), a company, person or firm that carries out duties of an auditor shall not engage in any relationship
with a client that will result in a conflict of interest between the person or firm and that client including a relationship with a client
that will
(a) place the person or firm in the position of auditing work of that person or firm,
(b) result in that person or firm acting as management or an employee of the client,
(c) place the person or firm in a position of being an advocate for the client.

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Ethics and the Professional Accountant
The International Federation of Accountants (IFAC) is the international body comprising over 175 member
organisations [including the Institute of Chartered Accountants-Ghana (ICAG)] from all over the world,
representing over 2.8 million professionally qualified Accountants, has its own Code of Ethics for Professional
Accountants.
 
Mission of IFAC
The mission of IFAC is, “to serve the public interest, strengthen the global accountancy profession and
contribute to the development of strong international economies by establishing and promoting adherence to
high-quality professional standards, furthering the international convergence of such standards, and speaking
out on public interest issues where the profession's expertise is most relevant” (IFAC).

Ethics
Ethic is a system of accepted beliefs that control behavior, especially” (Cambridge Dictionary). Thus, ethics is
seen as the branch of philosophy that deals with moral principles. There could be business ethics, and
professional ethics.

In the conduct of any of the professional duties of a Chartered Accountant, he/she must comply with the ethical
guidelines issued by the International Federation of Accountants.
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Ethical standards and professional responsibilities
The following fundamental principles are essential for members of the Institute of Chartered Accountants (Ghana):
•Integrity
•Objectivity and independence
•Professional competence and due care
•Confidentiality
•Professional behaviour
Visit: http://auditor101.com/fundamental-principles-ca/ for explanation

Threats to objectivity include the following

•Self-interest threat
•Self-review threat
•Advocacy threat
•Familiarity or trust threat
•Intimidation threat
Visit: https://whitecollaraccountant.com/threats-to-auditor-independence/ for explanation

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Consequences of unethical behaviour

Sanctions which may commonly be imposed by the Institute of Chartered Accountants (Ghana) and other
Chartered Accountants world-wide for misconduct include dismissal from membership, warning, payment of
costs, fine, suspension from membership for a period of time or withdrawal of practicing rights

Some of the disadvantages to the profession and society according to Institute of Chartered Accountants –
Nigeria (ICAN) are:
•Each time a professional Accountant (or any other professional for that matter) is found guilty of misconduct,
any type of sanction meted out to him has ripple effects on his immediate family, business and the economy. He
might have ended up losing his practicing license or getting his name struck off from the register; this is a loss
of income for him. If serious enough, his professional misconduct could have affected the going concern status
of his firm.
•A misconduct of a professional that affects the going concern status of his firm affects the various stakeholders
in that firm. For example, the creditors may not be able to receive all that is due to them, the partners may lose
either all or a substantial part of their capital while the employees as a whole may lose their jobs.
•The economy suffers from this type of scenario, the loss of income to government either on the employees’
personal income tax or the partners’ income tax (if in partnership).

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References

• Chartered Accountants Act 1963, Act 170 (1963). Accra: Primo Press Ltd.

• Ghana Companies Act 2019, Act 992 (2019). Accra: G.P.C. Assembly Press.

• Institute of Chartered Accountants (2005). Code of ethics. Accra: Primo Press Ltd.

• Millichamp, A.H. (2000). Auditing. London: Letts Educational.

• Okai I.T. (1996). Auditing for you. Accra: National Science and Technology Press.

• Okyere, D.O. (2016). Introduction to audit planning, control and investigations: Kumasi. Extex Print

Solutions.

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