Answer: a. There is a potential element which will increase the inherent risk because it is easier to commit fraud if the CFO wants to get the bonus. b. Majority of the accounting staff do not have the Accounting degrees. According to the General Standards, the audit is to be performed by a person or person having adequate technical training and proficiency as an auditor. will increase the mistakes when they are working because they do not have the professional accounting skills and knowledge. c. There are a lot of new employees which will increase the turnover ratio. They will make more mistakes because they are not familiar …show more content…
Even though the CFO in Gamma is experienced and professional auditor, most of the employees do not hold the accounting degree. It is easier to make a mistake because the employees lack of professional skills and knowledge about accounting. On the other hand, the coming new employees increase the turnover ratio which will increase the inherent risk.
15. What impact, if any, does the CEO’s (Mr. Parker) driving while intoxicated arrest in 1998 impact IR? Explain your answer.
Answer: I don’t think if the CEO was arrested will have an effect on inherent risk because the intoxicated arrest is not directly related with the accounting of Gamma. Furthermore, the intoxicated arrest could be explained as the individual behavior. According to the identify of inherent risk, intoxicated arrest is not resulted from the error or fraud, so it could not be regarded as the inherent risk.
16. What is your IR assessment? Support your conclusion using both the summary information in this document and the 2014 financial statements, including the analytical procedures you performed in Part …show more content…
Describe your responsibility to the public interest in considering Eric’s issue? How does this responsibility impact your consideration of whether to remove him from the Gamma audit?
Answer: Independence is a fundamental principle for an auditor. If the auditor is not independent of his/her client, users will lose confidence in the auditor’s ability to report on the financial statement. I need to make sure whether all members are independent. It is important to check whether Eric is independent auditor of the client.
18. Will you allow Eric to serve on the Gamma audit? Explain your reasoning, including how investors and regulators might view his participation on the audit.
Answer: I will allow Eris to continue to work as an auditor in Gamma. Eric’s aunt owns the common stock of the company does not impair the independence because she is not the immediate family member for Eric. Eric also states clearly that situation before he starts to be the auditor. On the other hand, I believe that Eric has adequate technical training and proficiency to perform the audit and he can exercise due professional care in the performance of the audit because he is a senior auditor now. The investors and regulators might not agree with because most of them do not have the professional accounting knowledge, so they will only consider about the