Aina is the manager at Shireen & Co, a firm of Chartered Certified Accountants. She has just attended a monthly meeting of audit partners and managers at which client-related matters were discussed. Information in relation to a client, which was discussed at the meeting, is given below: The audit report on the financial statements of Evergreen Bhd, a long-standing audit client, for the year ended 31 August 2021 was issued on 15th November 2021, and was unmodified. On 27th November, the audit committee of Evergreen Bhd contacted the audit engagement partner to discuss a fraud that had been discovered. The company’s internal auditors estimate that RM6 million has been stolen in a payroll fraud, which has been operating since March 2021. The audit engagement partner commented that neither tests of controls nor substantive audit procedures were conducted on payroll in the audit of the latest financial statements as in previous years’ audits there were no deficiencies found in controls over payroll. The total assets in Evergreen Bhd’s financial statements at 31st August 2021 were RM85 million. Evergreen Bhd is considering suing Shireen & Co for the total amount of cash stolen from the company, claiming that the audit firm was negligent in conducting the audit. Explain the matters that should be considered in determining whether Shireen & Co is liable to Evergreen Bhd.
Aina is the manager at Shireen & Co, a firm of Chartered Certified Accountants. She has just attended a monthly meeting of audit partners and managers at which client-related matters were discussed. Information in relation to a client, which was discussed at the meeting, is given below:
The audit report on the financial statements of Evergreen Bhd, a long-standing audit client, for the year ended 31 August 2021 was issued on 15th November 2021, and was unmodified. On 27th November, the audit committee of Evergreen Bhd contacted the audit engagement partner to discuss a fraud that had been discovered. The company’s internal auditors estimate that RM6 million has been stolen in a payroll fraud, which has been operating since March 2021.
The audit engagement partner commented that neither tests of controls nor substantive
The total assets in Evergreen Bhd’s financial statements at 31st August 2021 were RM85 million. Evergreen Bhd is considering suing Shireen & Co for the total amount of cash stolen from the company, claiming that the audit firm was negligent in conducting the audit.
Explain the matters that should be considered in determining whether Shireen & Co is liable to Evergreen Bhd.
Step by step
Solved in 2 steps
