In this assignment three parts and several topics based on accounting of Quintis Ltd will be introduced. As per Part a few answer will be introduced by the help of a video called false assurance and respectively Quintus financial collapse will explained in following Part B. This following article is a research based assignment which has three parts. In following Part C, a brief conclusion about whole learning based on Quintis’s accounting and financial collapse will be explained as per this particular research based assignment. Brief discussion about Key Audit matter (KAM) will be introduced in order to maintain auditor duties and responsibilities.
False Assurance can be considered to be a superior quality film that can be utilized as a tool for training that, by means of discussion or else discussion-associated practices, can augment knowledge. This not only includes a wide range of teams particularly in-house, counting teams of finance as well as internal audit, but also that of board members. Particularly, this video drama was formulated by the “Institute of Chartered Accountants England and Wales” and intends to assist in thought-generating discussions regarding the way accountants, assessors and company directors need to act when encountered with complicated circumstances. In particular, this film takes into account the account of two unstable years in of a fictitious business firm titled ‘D-Merton’, and divulges the way activities of the firm’s Executive Directors brought the same to its knees.
Essentially, there was inadequate vigilance and guts of Board of Directors of the firm. Also, there was also failure to recognize and inspect red flag concerns by external assessors. It can be said that the film is divided into four different segments. Essentially, at the closing of each segment, the respondents will be offered the opportunity to replicate and interacting opinions and debate regarding what they could have carried out in a better way instead, under similar state of affairs. Essentially, the issues identified in the film are both timely as well as pertinent to reality of Cyprus and can deliver a foundation for discussion regarding solutions and superior practices between ACI facilitators as well as the partakers of KPMG Cyprus.
Fraud symptoms can be classified into analytical symptoms, accounting otherwise documentation symptoms, symptoms of lifestyle, tips with complaints, symptoms of control together with behavioural along with verbal symptoms.
Analytical Symptoms: Revenue (high), low sales discounts, low sales returns, expense of bad debt, high accounts receivable, low allowance for bad debt, low cash in comparison to reported sales revenue (Purda &Skillicorn, 2015)
Documentary Symptoms: Documents missing in the cycle of revenue, ledgers associated to revenue not balancing (for example sales as well as receipts of cash), considerable bank items as well as other reconciliations, unapproved or else unsupported balances associated to revenue
Symptoms of control: Overriding important internal control actions linked to revenue cycle, weaknesses present in the cut off procedures otherwise other important accounting procedures.
The audit undertaken by TYSL accountants need to be as per ISA 240 indicates that accountabilities of auditors associating to fraud in process of audit of financial assertions. According to regulations stipulated under “ASA 240.5/ISA 240.5”, essentially the TYSL Accountants have accountability to sketch an audit to accomplish sensible assurance in order to ensure that fraud does not happen. Also, the impact of the scam has the need to be presented in the financial assertions. Then there exists no material misstatement particularly in financial statements owing to error otherwise fraud. This shows that there is need to present extensive investigation with the administration with regard to fraud. At the time of acquiring rational assurance it can be said that TYSL Accountants are accountable to enhance skill and maintain scepticism during the course of audit (referring to directives of “ASA 200.15/ISA200.15”) (Kachelmeier et al., 2017). Particular, it is also important to identify that procedures of audit that are effectual in identifying error might not be effectual in pointing out fraud. In order to make sure that overall engagement team is conscious of accountabilities and fraud risks as well as error. Again, ISAs also states that discussion needs to be carried out within team and for diverse members who are not in attendance at the specific meeting. The audit partner of D-Merton’s has the necessity to ascertain different matters that should be communicated properly.
Key issues of Qunton’s Financial collapse
The key issues of Quintis Ltd financial collapse include:
The fraud symptoms include:
The relevant authorities have the power to persecute the individuals that are responsible for committing the fraud. There can be a civil case or a criminal prosecution regarding the occurrence of that fraud. The authorities can make an arrest or enforce court orders or file an injunction. Since the company wilfully made the fraud, there is bound to be evidence that ties this company to the financial crisis. The auditor can find evidence of such matters in the correspondence emails between directors and the chairman’s emails.
According to ASA 701, key audit matters are those matters that are most significant in the auditor’s report. The auditor is required to describe each key audit matter and form an opinion thereon .It needs to describe and disclose each key audit matter in the auditor’s report. It is required to assess the responsibility of auditors. Some of the key audit matters include the improper valuation of biological assets , impairment evidences in carrying value of non-current assets and non-recognition of revenues for establishment fees. These disclosures have not greatly benefitted shareholders . The company made improper disclosures that caused significant losses to the shareholders. Providing adequate disclosures will provide a better corporate governance, better auditing and better financial reporting(Purda & Skillicorn 2015).
In Quintis, Ernst & Young disclose their audit report by Key audit matter in 2017. Such annual audit report based on the model of key audit matter is not able to create benefits criteria for the shareholders.According to Bédard,Gonthier-Besacier&Schatt, (2014),proper key audit matter report on annual audit report is going to be more significant and proper. Therefore specific key audit matter report is described in order to improve the fellow audit report. One significant changes are introduced towards Auditors own report standards to anInternational standards auditing report. Key Audit Matters (KAM) is associated in determining some following auditor’s report in accounting, which are-
In this report of key matter audit, each description of auditor’s report is based on a relevant reference in order to relative disclosure. This reference are proposed in order to understanding the importance of this key audit matters in respective audit report and the whole process and following requirements of this key audit matter report are need to be described.
The auditor was negligent in carrying out its duties. No appropriate audit evidence was done to conduct the audit. An auditor is expected to carry out its duties with skill and care.In this case the auditor was professionally negligent in carrying out its duties because the audit team could not uncover material misstatements that were abundant in this company. The auditor did not uncover any material misstatement in 2016. It is the responsibility of the auditor to form an unqualified opinion on the financial statements. This opinion should be independent and impartial . The objective of the auditor is to make sure that the financial statements of a company reflect a true and fair view of the financial statements
After going through the whole proposed audit report of the particular company, several duties responsibilities of auditors are not maintained. According toCarcello, Hermanson& Ye(2011), in order to create effective management, auditor’s responsibilities are required. As per the opinion on audit report several major responsibilities and duties are required in the case of this particular company’s audit report and those duties and liabilities are followed-
Conclusion
The audit undertaken by the company indicates that the auditing procedures have not been conducted in a fair manner. Although there is no material misstatement in the audit, the scam indicates that the audit has not been done in an appropriate manner. Hence it is very important to conduct the audit in a fair and responsible manner so that financial misstatements of this nature can be detected early. In both cases there is evidence of financial scam and the auditor was negligent in carrying out its duties
Bédard, J., Gonthier-Besacier, N., &Schatt, A. (2014, January). Costs and benefits of reportingKey Audit Matters in the audit report: The French experience. In International Symposium on Audit Research.Retrieved from https://documents. escdijon. eu/pdf/cig2014/ACTESDUCOLLOQUE/BEDARD_GONTHIER_BESACIER_SCHATT. pdf.
Carcello, J. V., Hermanson, D. R., & Ye, Z. (2011). Corporate governance research in accounting and auditing: Insights, practice implications, and future research directions. Auditing: A Journal of Practice & Theory, 30(3), 1-31.Retrieved fromhttps://aaapubs.org/doi/pdf/10.2308/ajpt-10112
Dillard, J., &Vinnari, E. (2017). A case study of critique: Critical perspectives on critical accounting. Critical Perspectives on Accounting, 43, 88-109.Retrieved fromhttps://tampub.uta.fi/bitstream/handle/10024/101036/a_case_study_of_critique_2017.pdf?sequence=1
Do, T. K. T., Hadji-Minaglou, F., Antoniotti, S., & Fernandez, X. (2015). Authenticity of essential oils. TrAC Trends in Analytical Chemistry, 66, 146-157.Retrieved fromhttps://botanicert.com/wp-content/uploads/2017/01/Article-Authenticity-of-essential-oils.pdf
Kachelmeier, S. J., Schmidt, J. J., & Valentine, K. (2017). The disclaimer effect of disclosing critical audit matters in the auditor’s report.Retrieved fromhttps://magazine.bus.miami.edu/_assets/files/faculty-and-research/conferences-and-seminars/accounting-seminars/KSV_93014.pdf
Kumar, J., & Agarwal, R. G. (2016). Design and Development of Electronic Tree Surveillance System for Detection of Illegal Wood Cutting (Doctoral dissertation).Retrieved fromhttps://dspace.thapar.edu:8080/jspui/bitstream/10266/4259/4/4259.pdf
Purda, L., &Skillicorn, D. (2015). Accounting variables, deception, and a bag of words: assessing the tools of fraud detection. Contemporary Accounting Research, 32(3),1193-1223.retrieved fromhttps://smith.queensu.ca/_templates/documents/governance/reports/accounting-variables.pdf
Velte, P., &Freidank, C. C. (2015). The link between in-and external rotation of the auditor and the quality of financial accounting and external audit. European Journal of Law and Economics, 40(2), 225-246.Retrieved fromhttps://www.researchgate.net/profile/Patrick_Velte/publication/257558065_The_link_between_in-_and_external_rotation_of_the_auditor_and_the_quality_of_financial_accounting_and_external_audit/links/54ce35ca0cf298d6565f797b.pdf
Wong, S., & Venkatraman, S. (2015). Financial accounting fraud detection using business intelligence. Asian Economic and Financial Review, 5(11), 1187.Retrieved fromhttps://www.conscientiabeam.com/pdf-files/eco/3/aefr-2015-5(11)-1187-1207.pdf
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