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Audit

Essay by 24  •  November 15, 2010  •  563 Words (3 Pages)  •  695 Views

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Before accepting appointment as group auditors, a firm should consider whether their own participation is sufficient to enable them to act as principal auditors.

They should consider:

a) The materiality of the portion of the financial statements they audit.

b) What they know of the components of the business

c) The nature of their relationship with the other auditor

d) Their ability to perform additional procedures.

e) The risk of material misstatements in the subsidiariesÐŽ¦ financial statements

Accounting policies. The primary directors should have arranged for uniform accounting policies to be applied to all group company financial statements. Where this is not so(perhaps for overseas legislative reasons), the principal auditors should ensure that full information is available for altering the financial statements, or if this is not possible that the differing polices should be fully explained.

Avaliability of information. The principal directors should have sufficient control over the subsidiaries to enable them to secure all the information that is needed about:

Accounting policies

Items that require disclouse

Consolidated adjustments.

If the primary directors lack sufficient information, the principal auditors should seek from the primary directorsÐŽ¦ permission to approach the subsidiaries or the other auditors directly. SAS 510.6 requires that the other auditors, knowing the context in which the principal auditors will use their work, should co-operate, subject to the necessary consent of the client, with the principal auditors

Moreover, section 133(1) of the ordinance gives:

A holding company a duty to obtain information and explanation from a subsidiary if the principal auditor requires it.

Where a holding company is incorporated in hong kong but its subsidiary is not.

When planning to use the work of the other auditors, the principal auditors should consider the professional competence of the auditors in the context of the specific assignment. Source of information for this consideration could be:

-common membership of a professional organization.(ACCA or HKICPA)

-common membership of , or affiliation with another firm of reference to the professional organization to which the other auditors belong.

The principal auditors should perform procedures to obtain sufficient appropriate audit evidence that the work of the other auditors is adequate for the

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