Answer to Question #277386 in English for Ribasshni

Question

Amirul an audit senior at Johan & Partners is assign to audit a new client. Amirul is not familiar to audit hospitality business. He is not sure of specific risks involved for the business. However, he is reluctant to seek advice from his manager because he fears it may affect his performance appraisal.

During his audit with this client, he noticed that the managers of the resort often have lunch in the restaurant at the resort. The managing director of the client informed Amirul that he could also have his lunch there for free as he desired. Amirul also discovered that one of the firm’s staff owns 10,000 shares (10 lots) in the client company. This staff is not in the team to audit the company. In addition, Amirul also noticed that, one of his team member plans to disclose some of the clients’ information to his friend, a competitor in the hospitality business in Sandakan. The client’s resort are showing profitable trend for the past five years.

Answer 1

Some of the challenges faced by Amirul during auditing are;

1) Fraud- the auditor being offered lunch for free might influence the results of the process.

2) Conflict of interest- A staff owning shares in the company may bring some conflict of interest when it comes to making vital decisions concerning the firm.

3) Improper accounting- Lunch offered to the managers by the firm are not captured in the books of accounting and treated in the correct way.

4) Lack of ethics- A team member disclosing a clients information to a competitor is not an ethical practice.