Auditing I — ACCT333 Project – Fall 2016

 

This project weighs 20% towards the overall grade of this course.

Project Background:

According to a press report on the web site of EREM NEWS1, many complaints have been raised recently in Doha claiming that some external auditors who are selected by the boards of directors are window dressing the financial statements of many companies rather than fulfilling their main role by adding credibility on them. Accordingly, these external auditors are accused of fulfilling the interests of these boards and ignoring what the international standards are all about.

Furthermore, former officials in the Qatari Chamber of Commerce and Industry argued that the majority of the audit firms in Qatar, regardless of the size of the audited company, adjust the financial statements in accordance with the interests of management, and unfortunately, these audit firms are justifying any adjustments in a way which would appear to serve the interests of the company and its shareholders, not the contrary.

In this regards, Mr. Abdulaziz Al-Emadi, former deputy chairman of the Chamber of Commerce and Industry in Qatar, demands the necessity of applying the standards of quality performance across all audit firms to ensure that the level of quality provided is preserved and high. Additionally, Mr. AL- Emadi warns of leniency and fraud which could lead to the emergence of misleading financial statements, which in turn, creates financial risks to the shareholders. These unwelcomed practices have effects both in the short term

1http://www.eremnews.com/economy/banking/5258361

and long term, and the end-result is shaking the confidence of investors in the stock market.

In light of the above, and assuming that you are the Engagement Audit Partner for Gulf International Services, one of the listed companies in Qatar Stock Exchange, you are currently in the planning process of auditing this client. By referring to the engagement letter, it is clearly stated that you will understand and test the system of internal controls, as well as the accounting system to assess the extent of their efficiency for the preparation of financial statements and to verify whether the company is holding true and fair statements. To do this you must obtain adequate evidence, reliable to the extent that it deems to be sufficient for you to draw reasonable and objective conclusions. In addition, you should take into account the risk of the audit and the level of materiality when planning and designing the audit procedures which would enable you to obtain sufficient evidence to build your adequate opinion of how true and fair the statements are.

Based on the above, you are required to submit a detailed report to address each of the following points:

1. Submit a proposal of all the members of the Audit Team with whom you shall be working with in order to audit Gulf International Services. You are required to clearly indicate the role to be played by each member of the audit team with a focus on the following terms:

?Audit cycle,
?Audit strategy, and?Audit plan.

2. In understanding and testing the system of internal controls of Gulf International Services, you may depend on the audit risk model. In this regard, you are required to explain the model and its three components:

?Inherent risk,
?Control risk, and?Detection risk.

You are also required to clarify the relationship between the degree of confidence and its relationship to audit risk. You may also consider the concept of materiality in this context by giving attention to the criteria that determine

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the materiality of the items being audited.

3. Once appropriate and sufficient evidence have been collected, it should all be documented and stored. Such filing is known as the Audit File. Discuss the benefits to be obtained by keeping and maintaining the audit file.

INSTRUCTIONS:

The answers provided for the points raised above MUST be in the form of an

individually written report.Word count is set at 1800 words(excluding

front page and list of references). You may exceed this word limit by a maximum

of 10%.

FORMAT OF REPORT (MUST ADHERE TO):

The report should be structured as follows:

• ? A titlepage (showing the project’s title as above, student’s name, student’s ID).

• ? Atable of contents.

• ? An appropriateintroductionrelevant to the project’s title.

• ? Sectionheadings, and if appropriate sub-sections. These are to be

  considered as your main body. Sections should be in a logical order showing

  cohesiveness and good writing skills.

• ? An appropriateconclusionat the end to conclude the discussion.

• ? List ofreferences. Remember thatreferences are required in the body of the text, not just at the end.

• ? Pages to benumbered.

• ? UseTIMES NEW ROMANas the font,size 12, and lines are to be1.5

  spacedNOT SINGLE SPACED, alsoADJUST THE LINES IN ALL THE PARAGRAPHS.

  DEADLINE:

  Both an online (safe assignment) and a hard copy are to be submitted on or before Sunday 4thof DECEMBER 2016. Please note that no extension to this date is permitted, so make sure you plan your time so there is no

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last minute rush. Assignments submitted after this date will not be marked. However, if you experienced a serious and unforeseeable problem which prevented you from submitting your work on time, you should consult the instructorIMMEDIATELY.

ACADEMIC INTEGRITY:

You should use your own words, not quote phrases from textbooks and lecture handouts.Lecture hand-outs are NOT to be used as sources of

references. It is expected that you will use textbooks and relevant journal articles

to obtain an understanding of the topic being addressed. If you use textbooks and/or journal articles as the source of ideas for your report, you must provide a reference. On average,4-8 relevant and recent referencesin total are considered appropriate. These can be a mix of text books and journal articles. I would not strongly advise you to use articles on untrusted websites as some of these may not be academically trusted sources. Hence, you need to do your own search via the University’s online library and have access to relevant articles and books.

Final Remarks:

?The student who shall submit the best report shall be acknowledged and honored.

?The student submitting the least/worst report would be expected to provide justification for the weak performance.