A. Identity and discuss three (3) ethical matters in the scenario above. B. Discuss the type of audit may conduct and give practical examples of matters that auditors may consider.
The lead consultant in your firm has asked you to conduct this review. The following were found during your review:
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The main source of funds for the Council are the grants received from the central government and levies from local businesses operating in the parish.
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The Council maintains financial records and prepares financial statements annually which are subject to audit by the Office of the Auditor General.
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The Council received a grant of US$25 million for the construction of ten community centers, one each in the ten communities under the control of the Council. This is part of a grant from a donor received by the Ministry. The Council as a sub- recipient signed an agreement in which it committed to adhering to the grant conditions.
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The principal grant conditions were:
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the maximum amount to be spent on each center is US$2 million
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all ten community Centres should be completed .
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Contracts to be awarded must be through competitive bidding.
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The project should be completed in four years.
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The Council completed five (5) centers . The average cost per center amounted to US$3.2 million, totaling US$9 million. The balance of US$4 million from the grant was spent on paying salaries to Council employees who were in arrears.
The following information was established concerning the centers constructed:
1. Only three (3) of the centers met the design specifications and were going to be
commissioned for use. The work on the other two centers were substandard.
2. The award of the contract to build the centers was not done through competitive bidding.
3 . The main contractor resides in the parish and has been working with the Council for the past ten years. This contractor price was viewed as being cheaper than other contractors in the market.
4. Two subcontractors were found to be related to a highly placed employee of the council; however, this was not disclosed.
5. The project was completed in 3 years and nine (9) months.
A review of the previous working papers of the last audit of this Council revealed that the risk of material misstatement was assessed to be high. During the audit it was established that the controls over inventory were poor and that there has been no inventory count at the year-end for many years. The audit also found that there were no practical completion certificates or engineer reports for construction projects conducted by the Council.
Required:
A.
Identity and discuss three (3) ethical matters in the scenario above.
B.
Discuss the type of audit may conduct and give practical examples of matters that auditors may consider.
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