Summary Of Independence Threats Safeguards â€Myassignmenthelp.Com

Question: Discuss About The Summary Of Independence Threats Safeguards? Answer: Introducation The situation described in the in the question is that Katrina Ng, the senior accounts manager from Jenkins Ltd has fallen ill and as result needs replacing for the next four months for which a replacement has been asked from Thornleigh Accountants. The substitute accountant that Thornleigh Accountants provided is Ellen Davis and she finished the tenure in mid May. Now Thornleigh Accountants will conduct the audit of Jenkins Ltd and has an intention to use Ellen Davis as a part of the audit team. The specific domain of threat to independence under which this situation falls is, Self-review threat (Tepalagul and Lin 2015). This is because a member of Thornleigh Ltd namely Ellen Davis has recently been a part of Jenkins Ltd and audit team of Jenkins Ltd will also include Ellen Davis. In simpler terms, if one of the members of the audit and assurance team has been an employee of the client organization in the recent past and has been in a designation to influence the subject matter to b e evaluated then the situation falls under self-review threat. The situation given in this question is that the Audit Manager of Dargin Associates Accountants has received the accounting statements from Winmalee Ltd and has taken an optimistic approach to the valuation of development expenditure capitalized in intangible assets. It should also be noted that the senior staff bonuses is directly related to the firms profit performance and Winmalee has also provided copies of details taken from various accounting standards which are sympathetic to their approach to valuation of these assets. According to the conditions given in the situation, the domain of threat to independence under which this situation falls is familiarity or relationships threat (Blay and Geiger 2013). A familiarity or relationships threat is essentially a threat which is posed upon when the auditor has a close family or business relationship with the client. Now in this situation the audit manager may be lenient as Winmalee has used accounting standards which are sympathetic t o the approach of valuation as the bonus of senior staff depends directly on the total revenue. Therefore a relationships threat may arise on emotional terms (Carson et al., 2012). The situation given in the question is that the audit of a particular chocolate company has been asked to be done by the audit firm and it has also invited the audit firm to visit its second chocolate shop where defective chocolates are sold at a considerable discounted price. This situation will fall under self-interest threat as the auditing firm if refuses to comply with the unethical practices conducted by the chocolate company then it may refuse it to execute the audit of the financial statements of the company. Thus the auditing firm is concerned with losing a potent client (DeFond and Zhang 2014). The situation that is given in the question is that the Expert Travel Company currently wants to change the auditor as they want an auditor who is flexible in his approach for checking the financial standards of the company and as a result wants a final answer from the current auditor. This situation will again fall under self-interest threat as it can be observed that the auditor has financial interest in his client. In simpler terms the current auditor has the opportunity to accept the unethical practice proposed by the company and thus it falls under the category of self-interest threat (Koch, Weber and Wstemann 2012). he situation depicted in the question is that while carrying out the audit of Elmtree it comes into light that a senior member of the audit team, Elaine Ong is engaged to James Bing who is the senior accountant at Elmtree. This situation very rightly will fall under the category of familiarity threat as one of the members of the audit team has a family member or would be family member in the client organization. Elaine Ong being engaged to James Bing may widen the scope of improper auditing, thus it falls under familiarity threat (Dhaliwal et al., 2015). The situation mentioned in the question is that MCM Accountants will conduct an audit of Rangers Ltd. Now it is found out that one of the senior auditors on the audit Diane Polo plays on the same softball team as Elise Lift, the senior accountant and several other staff members from Rangers Ltd. This situation might fall under the category of familiarity threat, but no details have been provided in the question as to for how long Diane Polo is playing softball with Elise and other staff members of Rangers Ltd. If Elise and the other staff members are a mere acquaintance for Diane Polo then it will not fall under the category of any kind of threats but if a long association exists between Elise and the other staff members then it will definitely fall under the category of familiarity threat (Dhaliwal et al., 2015). An auditors report is one of the most important means by which the auditor makes a sincere effort in communicating the genuine information regarding the financial statements of the company to its stakeholders. With time unlike the structure of an auditors report, the accounting procedures of a firm have become more complex and global in nature. In present times auditors are taking on more risks in order to carry out error free auditing. The details of the information that is needed to be included in the audit report of the financial statements of a public company are audit matter that is critical, determinants for including each critical audit matter, exact clarification for each inclusion, a basic information regarding auditor tenure and also a standardized format of the audit report should be maintained by the auditor. An audit report should also very importantly highlight the loopholes in the financial statements in the company which is beneficial both for the company and its stakeholders (Gold, Gronewold and Pott 2012). References Blay, A.D. and Geiger, M.A., 2013. Auditor fees and auditor independence: Evidence from going concern reporting decisions. Contemporary Accounting Research, 30(2), pp.579-606. Carson, E., Fargher, N.L., Geiger, M.A., Lennox, C.S., Raghunandan, K. and Willekens, M., 2012. Audit reporting for going-concern uncertainty: A research synthesis. Auditing: AThe situation that is given in the question is that the Expertournal of Practice Theory, 32(sp1), pp.353-384. DeFond, M. and Zhang, J., 2014. A review of archival auditing research. Journal of Accounting and Economics, 58(2), pp.275-326. Dhaliwal, D.S., Lamoreaux, P.T., Lennox, C.S. and Mauler, L.M., 2015. Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence during the Post?SOX Period. Contemporary Accounting Research, 32(2), pp.575-607. Gold, A., Gronewold, U. and Pott, C., 2012. The ISA 700 auditor's report and the audit expectation gapdo explanations matter?. International Journal of Auditing, 16(3), pp.286-307. Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor Francis. Koch, C., Weber, M. and Wstemann, J., 2012. Can auditors be independent? experimental evidence on the effects of client type. European Accounting Review, 21(4), pp.797-823. Tepalagul, N. and Lin, L., 2015. Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing Finance, 30(1), pp.101-121.