Addis Ababa University

Collage of Business & Economics

School of Commerce

Extension Program

Auditing Principles & Practices-Part II

(AcFn 3162)
Total Marks 30%

May 2020

Individual Assignment
8) Discuss the 3-Final
similarities and differences between financial statement audits, operational audits,
and compliance audits. Give an example of each type.
Answer: Financial statement audits, operational audits, and compliance audits are similar in that
To be submitted online on or before June
each type of audit involves accumulating and evaluating evidence about information to ascertain
and report on the degree of correspondence between the information and established criteria
and/or procedures, rules, or regulations. The differences between each type of audit are the
10, 2020
information being examined and the criteria used to evaluate the information.

A financial statement audit is conducted to determine whether finance

Addis Ababa, Ethiopia

 1. Assume you are accepting the financial statement audit assignment for a client having
the following audit related information, identified by an independent consultant &
finally confirmed by the engagement partner.
1. Significant material misstatement of financial statements
2. Significant Combined inherent & control risk
3. Illegal activity committed by top management
4. Wide spread thefts & misappropriations is the new normal practice of the
company.
5. The name of the entity is associated with mass-media for Bad reputation.
6. All PESTELI (i.e. political, economical, social, technological, environmental, legal &
other industry practices) are not in favor of the organization.
7. Disclaimer opinion is becoming the legacy of the entity.
8. Management’s intentional use of Dubious accounting policies to narrow
expectation Gap’s on performances.
9. Visible violations of laws, regulations, agreements & contracts.

Based on the above conditions, events & circumstances identify the appropriate auditor’s
responses, assuming that the auditor is accepting the engagement.

1. Auditor’s staff assignment i.e. nature, composition, & status of auditor’s to be

assigned.
2. The nature, timing & extent of subsequent audit procedures.
3. The professional skepticism & professional due care of the auditor.
4. To the assessment of detection risk of the auditor.
5. Auditor’s reliance on internal control system of the client.
6. Auditor’s considerations for the use of the experts.
7. Auditor’s assessments for sufficiency & competencies of audit evidences
8. Auditor’s communications to those charged with Governances for audit related
matters.
9. Audit opinions & conclusions

2. CORONA VIRUS PANDEMIC (Covd-19) significantly affects the way business is

operating locally, national ly & internationally. Supply chain management at all
levels of businesses are challenged. Particularly accounting estimates & judgments
are the victims. faithful representation of financial statements is doubtful (HINT:
for this condition particularly identify the BUSINESS RISKS, FINANCIAL STATEMENT
RISKS & AUDIT RISKS RELATED TO THE GLOBAL PANDEMIC ASSUMING THE HOTEL
INDUSTRY FORMIDABLY IMPLICATED)
NB: Handwritten work is not acceptable
Use your name and section as a file name