Question 12:
If an audit engagement is accepted but the Auditor does not have knowledge about the client’s operations, he should
A. Obtain a legal advice on what to do
B. Transfer the audit work to a big and experienced audit firm
C. Employ a joint Auditor who is experienced in the nature of the client’s business
D. Obtain knowledge on matters relating to client’s business by hiring an expert
E. Reject the appointment outright
The correct answer is (D)
Past Question Review:
Statutory auditors perform audits and sign audit reports. These reports are the auditors’ opinion on the truth and fairness of financial statements.
The auditor has responsibilities to shareholders and other third parties who may place a level of reliance on the financial statements certified by him. If the auditor fails to meet the standard of care required and consequently a loss is suffered by any of the affected parties remedy can be obtained against the auditors in a constituted court.
As his work is relied upon by others, the auditor clearly has a responsibility to do his work honestly and carefully. He must be honest, that is, he must not certify what he does not believe to be true, and he must take reasonable care and skill before he believes that what he certifies is true.
If an audit engagement is accepted but the Auditor does not have knowledge about the client’s operations, he should obtain knowledge on matters relating to client’s business by hiring an expert.
The correct answer is (D)
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