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Issue: 'We can rely on the work performed by external audit'

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Issue: 'We can rely on the work performed by external audit'

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The above statement is an issue as we are not obtaining sufficient audit evidence. We cannot rely on information that has been produced by another team that is not an expert, especially as later on in the scenario it is stated that no real work was performed by the team. We owe a responsibility to users of financial info and by cutting corners and cross referencing work done by another team we may issue an incorrect opinion.

Sufficient audit testing needs to be completed to ensure we can provide an accurate audit opinion.

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Cameron Co is audited by a small firm, Carrey Associates which also provides internal audit services which could have a risk of self-review and self-interest (fee dependency).

This could mean that Carrey Associates are self-reviewing work which they have performed during internal audit and are unlikely to highlight any potential misstatements in case their work quality is questioned by the Cameron Co.

Additionally, if they have a large portion of their fees from Cameron Co, they may be reliant on these fees causing a self-interest review as they may be less likely to highlight misstatements for fear of losing work.

The firm should review the work performed for internal audit, including the resources used and barriers for information to ensure that there is no / limited self-review threat.

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Even though the local accounting rules are similar to IFRS, there might still be differences which might cause to show a very different picture to third parties reading the FS. No evidence or confirmation of the figures is being obtained.

The group audit team should have obtained enough evidence and documented the difference between the local accounting rules and IFRS. Only then it would be possible to state whether such differences are material or not.

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Cameron Co uses local accounting standards while the Group use IFRS. This is allowed by national regulation however the group audit partner stated that no additional testing was needed in regards to the use of different standards as they were verily similar.

James Co will be used to auditing accounts that follow IFRS and therefore could have missed mistakes in the accounts of Cameron Co if they're not familiar with the differences that need to be adhered to in the local accounting standards

The audit partner of James Co needs to ensure that the audit team is trained up on the differences between the local accounting standards and IFRS, and perform more tests to ensure these have been used correctly

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There is no information about Carrey associates held on file, which means there has been no assessment made as to their competencies and qualifications.

This could mean that the subsidiary audit firm are not capable of conducting the audit and therefore their opinion and the audited figures cannot be relied upon for accurate consolidation.

As such, the Group audit firm should obtain more information regarding the competency of the subsidiary firm.

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An audit partner of James & Co left to become an audit parnter at Carrey Associates and was involved in the audit. There is a familiarity risk and potential intimation risk here.

The audit partner will know how James & Co operates and might prevent misstatements from being found. They might use imitation tactics on their former colleagues to manipulate their samples and redirect their searches. The auditors of James & Co should not just reply on this audit partner's representation but review the controls

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Cameron doenst follow IFRS which are applied by the rest of the group. - Audit team relied on their consolidation as the local accounting rule are quite similiar.

the Subsidiary Cameron should have followed IFRS according to accounting standard.

Group should have ensure the consolidation was done properly as they are responsible

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 ‘our firm can rely on the work of Carrey Associates, as one of James & Co’s audit partners left the firm to become an audit partner at Carrey Associates, and he was involved with the audit of Cameron Co’

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 ‘our firm can rely on the work of Carrey Associates, as one of James & Co’s audit partners left the firm to become an audit partner at Carrey Associates, and he was involved with the audit of Cameron Co’

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The fact that one partner from James & Co left to join Carrey Associates, poses a familiarity threat, as the audit team might know their former audit partner closely and close an eye for certain testing.

This being said, there was no mention of audit work in relation to the skills and ability of Carrey Associate's, thus James & Co might be relying blindly on the work of the component auditor.

Relevant safeguards and skills and ability work on the component auditor should be documented on the audit file to close off the risks of familiarity and lack of competence of component auditor.

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We need to perform additional quality work for Cameron co.

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Group audit need to use consolidation but use local accounting rules which is incorrect.

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Group audit need to use consolidation but use local accounting rules which is incorrect.

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countries the leicence is for, as this might restrict future trades

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it would be good to know if they did any impairment over the intangible asset.

this is going to assess if we need to make any impairment review to the intangible asset in near future.

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Enquire of management the process and requirements to obtain the import licence and the resources involved. This is to understand any additional costs to obtain the licence in terms of time spent and any potential difficulties or risk of not being able to obtain in the future which could limit profitability.

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Find out if there are additional fees in order to get the $1.5m import license for re-renewal as best case scenario it only lasts 3 years. This is to understand if there are any hidden costs that will need to be provisioned for

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find out if the useful life is only for 3 years only or if there is any possibility to expand or renew?

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any breaches ?