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  • 6 Marks

AA – Dec 2022 – L2 – Q5d – Audit and Assurance Risk Environment

States the auditor's responsibilities when significant deficiencies in internal control are identified during an audit.

A significant deficiency in internal control is one which merits the attention of those charged with governance.

Required:
State THREE (3) requirements of an Auditor when there are deficiencies in internal control of a client.

Requirements of an auditor when deficiencies in internal control are identified:

  • The auditor must determine whether the identified deficiencies are significant individually or in combination with others.
  • The auditor must communicate in writing significant deficiencies to those charged with governance on a timely basis.
  • The auditor must communicate to management any other deficiencies that have not been communicated by other parties, if deemed important enough to warrant attention.
  • 10 Marks

AA – Dec 2022 – L2 – Q2a – Internal Audit and Its Relationship with External Audit

Describes the five key roles external auditors play in corporate governance to ensure the transparency and reliability of financial statements.

External Auditors play a key role in the corporate governance framework. They conduct one of the most important corporate governance checks that help to monitor management’s activities. The audit of financial statements makes disclosures more reliable, thus increasing confidence in the company’s transparency.

Required:
Explain FIVE (5) roles that External Auditors play in Corporate Governance.

Roles of External Auditors in Corporate Governance:

  • External auditors ensure that the financial statements are free from material misstatements, thereby increasing the reliability of financial disclosures.
  • They monitor management’s activities and ensure that the company acts in the best interest of shareholders.
  • By working with the audit committee, external auditors ensure strong internal controls and effective financial reporting processes.
  • External auditors help to detect fraud, errors, and irregularities that could distort the financial statements.
  • They provide an independent opinion, adding value to corporate governance by ensuring transparency and accountability.

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