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Explain the role of the independent auditor - NSC Accounting - Question 3 - 2016 - Paper 1
Question 3
Explain the role of the independent auditor. The independent auditor is responsible for providing an objective evaluation of the financial statements of Gunuz Limit... show full transcript
Worked Solution & Example Answer:Explain the role of the independent auditor - NSC Accounting - Question 3 - 2016 - Paper 1
Step 1
2. Did Gunuz Ltd receive a qualified, unqualified or a disclaimer audit report? Explain your choice.
Answer
Gunuz Ltd received a qualified audit report. This is indicated by the auditor's opinion where they stated that the financial statements fairly present the financial position of the company, except for the marketing expense which could not be verified due to lack of documentation. A qualified report suggests that while the financial statements are largely reliable, there are specific areas of concern that need addressing.
Step 2
3.2.3 Provide TWO consequences for the auditor if she agreed to this request.
Answer
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Loss of Independence: By agreeing to this request, the auditor compromises their independence, which may lead to bias in the audit process. This could undermine the credibility of the audit and the auditor's professional integrity.
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Legal Liabilities: If the auditor agrees to bypass their standard procedures or to conceal discrepancies, they could face legal consequences for misleading stakeholders, including potential lawsuits or sanctions by regulatory bodies.