1. LECTURE 1 INTRODUCTION TO AUDITING REGULATORY ENVIRONMENT OF AUDIT &
CODE OF ETHICS AND CONDUCT

2. Auditing Defined
Auditing involves collection and evaluation of evidence by an independent appointed auditor in order to provide an opinion on true and fairness of given financial statement
The practice of audit date back to medieval times when Tudors and monarchs appoint trusted person to hear (audi) accounts rendered by stewards
The phase and method of audit has evolved but its underlying objective remains

3. Objectives of an audit
The objective of an audit depends on the type of engagement
General purpose external audit is to provide reasonable assurance (opinion) on true and fairness
Review engagements are meant to provide limited assurance
Internal audit are to deal with matters regarding internal control
Specialised audits also have their predetermined objectives

4. Types of Audit External (Statutory) versus Internal Audit
General purpose audit versus Specialised Audit

5. The Appointed Auditor The auditor is always appointed under a contract
The contract is between the company and the auditor
In statutory audit, the auditor is appointed by owners of the business
In exceptional circumstances, external auditors may be appointed by persons managing the business or the Registrar of Companies (newly incorporated company, interim auditors)
In internal audit, the auditor is appointed by persons managing the business

6. The Appointed Auditor
The remuneration of the auditor is negotiated between the auditor and the appointing person
The fees are based on time spent and skill needed to conduct the audit
The agreed fees or formulae for determining the audit fees should be mentioned in the letter of engagement

7. Qualification of an independent Auditor
In Ghana, S 134 of the companies Act stipulates persons who can be appointed auditors
Member of ICA Ghana or Members of a foreign accounting body registered and approved by ICAG
Practicing license granted by ICAG Ghana

8. Disqualification
Despite meeting qualification criteria, the following persons are disqualified to be appointed auditors
An officer of the company or any associated company
A partner or employee or servant of the company

9. Powers and Right of Auditors
In Ghana, the companies Act conferred on appointed auditors the following powers and rights
Right of access, at all times, to all books, documents and vouchers of the company
The right to demand explanation from officers of the company on all matters that he deems relevant for performance of the audit
The right to receive notices of meetings, attend such meetings as well as to speak at all general meetings on any matters that concerns him as an auditor

10. Removal of appointed Auditor
The auditor can be removed by the appointing person upon following due process
External auditor appointed by members can be removed only by the members
External auditor appointed by managing board can be removed by the board only before such appointment is ratified by members of the company
In ideal situations, internal auditors can be removed only after recommendation by the audit committee of governing board

11. International Regulatory Framework for Audit and Assurance
The audit profession and the work of the auditors have come under serious scrutiny following increasing corporate scandals
Enron, WorldCom in US
Olympus in Japan
Autonomy in UK
Discuss briefly the Enron scandals and how auditors are perceived as contributors to the scandal

12. International Regulatory Framework for Audit and Assurance
The Accounting profession has responded by restructuring standard setting boards and Professional Ethic monitoring systems
The public oversight systems has also been strengthened

13. The legal and Professional framework
IFAC
INTERNATIONAL AUDITING AND ASSURANCE STANDARD BOARD (IAASB)
Authoritative
(ISA, ISQCs, ISRE,ISRS)- Authoritative
Non Authoritative
IAPN, Staff notes, Consultation Papers-
INTERNATIONAL ETHICS STANDARDS BOARD FOR ACCOUNTANTS (IESBA)
Code of Ethics for Professional Accountants
See Page 5 for current ISAs

14. The legal and Professional framework
Public Oversight
Public Interest oversight Board
Monitoring of Standard setting boards
Overseeing membership nomination Process
Co-operation with national oversight Authorities
Others
Public Company Accounting oversight board (Sarbanes-Oxley)

15. CHAPTER 2: CODE OF ETHICS AND CONDUCT
Fundamental Principles and the conceptual framework approach
Independence
Confidentiality
Conflict of interest
Conflict in application of the financial principles

16. Fundamental Principles and the conceptual framework approach
The Auditor is required to be and be seen to be ethical in his dealing with clients
The IESBA of IFAC issues Code of ethics for professional Accountants

17. IFAC Fundamental Principles
Ethical Principles
IFAC Fundamental Principles
Integrity
To be straightforward and honest in all business relationships
Objectivity
Not to allow bias, conflict of interest or undue influence to override professional judgment
Professional Competence and due care
To maintain professional knowledge and ensure client receives competent professional service
Confidentiality
Not to disclose any information to third parties without proper and specific authority unless there is a legal or professional right to disclose
Professional Behavior
To comply with relevant laws and regulations and to avoid any action that discredit the profession

18. Threats to Compliance with fundamental Principles
Five general sources of threat
Self Interest threat
Self review threat
Advocacy threat
Familiarity threat
Intimidation threat

19. Safeguards and breach Two general categories of safeguards
Safeguards created by the profession, legislation and regulation
Safeguards in the work environment (firm-wide or engagement specific)
The IESBA states: Where a firm concludes that a breach of ethical principles, the firm shall terminate, suspend or eliminate the interest or the relationship and address the consequences of the breach

20. Auditor Independence
The auditor must be and to be seen to be independent
Independence means
Of the mind
In appearance
Professional Skepticism
For Audit, the audit team, the firm and network firm must all be independent
For non audit, restricted use engagement, the auditor must not have financial interest
Threat to independence include personal interests, self review, disputes and intimidation

21. Confidentiality
Not to disclose any information to third parties without proper and specific authority unless there is a legal or professional right to disclose
Exceptions
Disclosure permitted by law and authorised by client
Disclosure required by law
Right or duty to disclose

22. Conflict of Interest Two kinds of conflict of interest
Conflicts between interest of different clients
Conflicts between members’ and client’s interest
refer to page 50

23. Money Laundering
It is a process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activity, allowing them to maintain control over the proceeds, and ultimately providing a legitimate cover for their source of income

24. Money Laundering 3 Stages in Money Laundering
Placement: Introducing the illegal funds into the financial system (lots of small cash deposits, cash intensive business
Layering: Passing the money through a large number of transactions so as to conceal its original source (multiple domestic and international transfers, numerous purchase and sale of investments false sales)
Integration: Final integration of funds back into legitimate economy

25. Money Laundering-Discussion Point
Why Launder Money and what makes money laundering difficult for the external Auditor to detect

26. Auditor’s responsibility on Money Laundering
The key responsibility of the independent auditor with respect to Money laundering is client due diligence-KYC
The nature of the clients activity
Ownership and management
Identification of PEPs
Risk based approach- Money Laundering risk indicators
In-house the auditor should
Appoint A Money Laundering Reporting Officer (MLRO)
Have policies and procedures on ML
Education and training of Staff
Money Laundering reporting

27. Auditor’s responsibility-Compliance to Laws and Regulation
Businesses operate in a web of laws and regulation
It is management’s responsibility to ensure their company complies with these regulations
ISA 250 however requires auditors to perform audit procedures to identify issues of non compliance and discuss same with management and those charged with governance
The auditor is to assess effect of non compliance on financial statement and implication for audit opinion

28. PRACTICAL QUESTIONS TO DISCUSS
1-AUDIT Pg 511
2. FUNDAMENTAL PRINCIPLES Pg 511
3. AVENTURA INTERNATIONAL Pg 511