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Unit 14: Professional Ethics and Current Issues

 Whether to accept or not to accept an audit engagement after considering the risk Notes
involved and the expertise the audit firm has

 The going concern problem needs more attention than usual
 The function of internal audit becomes especially important
 The focus of internal controls may be different
 Audit firms may be involved as advisors and consultants for setting clients’
e-commerce systems
In many ways, the procedures required in carrying out audits on clients engaged in E-commerce
are the same as those used on any other audit. A possible approach could be:

 Consider accepting or not accepting the audit engagement. If you have already accepted,
consider whether or not you should continue with the engagement.

 Assign staff with appropriate technical expertise.
 Obtain a very detailed knowledge of the business (KOB) and especially of the risks facing
the client.

 Evaluate the implications of the risks to the auditor.
 Examine and assess the overall control environment.
 Examine and assess the specific controls in force. In this case, auditing around the computer
is often not desirable. Use the computer as an audit tool.

 Examine and assess the controls in place in connection with outsourced processing.
 Liaise with the internal auditor and assess the internal audit function.
 Pay special attention to going concern.

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Caution Ensure that the client has some form of business continuity planning in the case of
systems failure.

14.3.5 Financial Reporting and Websites

Many firms now put their financial statements on the web. This presents problems for the
auditor as financial statements on the web may be altered. As a result, users may rely on wrong
information. In such a situation, the letter of engagement should include:

 Acknowledgement by the auditor that the report may be published on the web.
 A statement that the responsibilities for the report published on the web rests with directors.
 A statement that the company should seek advice from the auditors before making any
electronic publication.
 A statement that the auditors reserve the right to withhold consent to publish their report
electronically if the financial statements or auditors’ report are published inappropriately.

 A statement that the directors are responsible for the controls over, and security of, the
web site.
 A statement that the examination of the controls over the maintenance and integrity of the
web site is not part of the auditors’ duties but can be added if required.

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