what should an auditor do when a noncompliance or significant obversations is made?
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This includes understanding the type of noncompliance (e.g., regulatory, internal policy, financial reporting), its impact on the organization, and its potential risks. Show more…
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CASES CASE 1 Review the engagement observation that follows and record the specific information that represents the recommendation and each of the following observation attributes: criteria, condition, cause, and effect. Audit Observation and Recommendation: Corporation X associates are required to abide by the organization's formal Code of Business Conduct & Ethics (the Code). To ensure all employees are aware of the Code and their obligations under it, Corporation X requires all associates to acknowledge receipt of the Code. A global email was sent to all associates on July 1 informing them of their obligation to read and acknowledge the Code. Associates were instructed to complete and return acknowledgments by December 1. Our audit testing indicated the following relative to the acknowledgment process: - As of March 1, fewer than 50 percent of associates had completed and returned acknowledgments. - Follow-up procedures have not been performed by human resources (HR) or department management to date. - There is not a formal policy indicating actions to be taken if and when associates do not return acknowledgments. - No disciplinary actions have been taken regarding associates who have not completed acknowledgments of the Code to date. Improving the acknowledgment process will help Corporation X demonstrate compliance with external regulations requiring a Code of Ethics. It will also help to ensure all associates are aware of their responsibilities and obligations to the organization under the Code. We recommend management enhance the acknowledgment tracking process to ensure all associates acknowledge receipt of, compliance with, and understanding of the Code. Policy and procedures need to be developed and implemented to take appropriate action when associates do not respond. Disciplinary action should be taken if associates refuse to complete and return acknowledgments, as required by policy. Management Response: Associates who have not acknowledged the Code as of March 24 will be sent a reminder notification the week of April 3 informing them of the requirement to acknowledge the Code. A report of all associates who continue to be delinquent in acknowledging the Code will be provided to the applicable HR liaison for review and follow-up the week of April 17. The HR function will partner with the department business heads of delinquent associates to obtain the necessary acknowledgments. A final report will be generated the week of April 24 to determine the remaining associates who have not acknowledged the Code. A verbal warning will be issued to all associates who have not acknowledged the Code by April 24 and a written warning will be provided to associates who have not acknowledged the Code by April 30. Accountability: Jane Doe Responsibility: John Smith Implementation Date: March 24 Does the observation, as presented, adequately address all of the suggested observation attributes? If not, explain why.
Akash M.
Write a recommendation letter addressed to the Board of Directors of your hypothetical audit client for the formation of a compliance assessment team. Assume that the audit client is a publicly held organization. • Choose what type of business they operate and their industry classification. • Address the following: What are the requirements of the NYSE, SEC, and credit rating agencies? Provide detail to justify the need for a compliance assessment team for your audit client. What other compliance-related requirements are important functions relating to governance, risk, and compliance (GRC) that the compliance assessment team will be responsible for? What necessary compliance recommendations would you make to your audit client?
The following are independent situations that have occurred in your public accounting firm, Arthur Hurdman: Case 1: During the internal inspection by a regional office of Arthur Hurdman, one of its clients, Wildcat Oil Suppliers, was selected for review. The reviewers questioned the thoroughness of inventory obsolescence procedures, especially in light of the depressed state of the oil exploration industry at the time. They believed that specific substantive procedures, which they considered appropriate, were not performed by your audit team. Case 2: Top Stove, one of your clients, installed an automated system in July 2017 to process part of its accounting transactions. You completed the audit of Top Stove's December 31, 2017, statements on February 15, 2018. During the April 2018 review work on Top Stove's first quarter financial information, you discovered that during the audit of the 2017 statements, only the manual records had been investigated in the search for unrecorded liabilities. Required: a. Without regard to the specific situation given, answer the following questions: 1. What are the proper steps auditors should take if it is discovered, after the report date, that an important substantive procedure was omitted? 2. How are auditors' decisions affected if, after review of the audit documentation, they determine that other substantive procedures produced the sufficient appropriate audit evidence? 3. If, in subsequently applying the omitted procedure, auditors become aware of material new information that should have been disclosed in the financial statements, how should they proceed? b. Describe the proper action to take in each of the preceding situations, given the following additional information: Case 1: You thoroughly consider the scope of the audit of Wildcat Oil Suppliers and have made a detailed review of the audit documentation. You have concluded that sufficient compensating procedures were conducted to support the valuation of inventory. Case 2: Your subsequent investigation of the information system's records of Top Stove revealed that material liabilities were not recorded as of December 31.
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