Reporting responsibilities

Question 1

What happens if RI requirements not met?

Answer 1

• Consider Ethics
• ISA 265/260
• NOCLAR
• Conclude
• Also state RI not applicable due to…
• Qualify Audit report
• Risk assessment response (unpredictably etc)

Question 2

Impact on Audit

Answer 2

-Reliance

Reliance
•Internal audit is not independent due to the personal financial interest the director has in the company.
•ISA 610 states that the organisation status of the internal audit has to be considered - no information has been given to be able to assess this
•This will indicate that IAE should not be relied upon in the audit.
-King IV
-Companies Act
-General responses
*Less reliance should be placed on management evidence and more focus should be given to 3rd party evidence
*More experienced resources should be placed on the audit.
*Professional scepticism should be increased.
*More unpredictability procedures should be performed
-Reporting
*This is an unlawful act committed by management (non-compliance with Co Act by director).
*It is fraudulent in nature as the director did not disclose his interest for personal gain.
*This can cause material financial loss to the company as they are paying double for the services rendered.
*This is also a breach of fiduciary duty in terms od s 76 as the director did not act in the best interest of the company.
*Therefore this qualifies as an RI and should be reported to IRBA by the auditors.
*The RI should be included in the audit report as well.