National Economics University

School of Advanced Education Programs

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Subject: Auditing and Assurance Services

Instructor: Hakjoon Song, Ph. D., CPA in U.S.

Homework
For Chapter 4 & 5

Advanced Accouting Intake 58 A – Group 6:

1. Dang Duc Anh – Roster: 1
2. Nguyen Gia Duc – Roster: 8
3. Ngo Xuan Hien – Roster: 15
4. Le Duc Huan – Roster: 19
5. Nguyen Hoang Minh – Roster: 27

Hanoi, July 2019

Contents
CHAPTER 4: PROFESSIONAL ETHICS ............................................................................................................. 1
Question 4-6 ............................................................................................................................................. 1
CHAPTER 5: LEGAL LIABILITY ........................................................................................................................ 1
Question 5-2 ............................................................................................................................................. 1
Question 5-3 ............................................................................................................................................. 2
Question 5-5 ............................................................................................................................................. 3
Homework – Chapter 4 & 5 07/25/2019 Group 6

CHAPTER 4: PROFESSIONAL ETHICS

Question 4-6: Why is an auditor’s independence so essential?

Independent audit reports are of great significance to the senior managers of the unit; may be

existing shareholders, investors are considering whether to invest in the unit or not; organizations

and individuals that are or will lend capital; related state management agencies ... Anyone who

needs an honest and objective voice about the financial statements they are interested in needs an

independent audit report.

Independent auditing is not a miracle to turn a distorted, unprofitable financial report into a

beautiful glittering financial report with perfect indicators. How the financial situation of the unit

will be recorded by the independent auditor. Financial statements are made by publishers and

independent auditors that do not modify their numbers and words in their financial statements.

In some cases, the independent auditing of financial statements is a mandatory regulation of the

state management agency, also aimed at protecting the rights of readers of financial statements.

They will have access to independent and reliable information.

CHAPTER 5: LEGAL LIABILITY

Question 5-2: Distinguish between audit risk and audit failure

Audit failure: happened when the auditor issues an incorrect audit due to the auditing standards

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Homework – Chapter 4 & 5 07/25/2019 Group 6

Audit risk: the possibility that the auditor concludes after that the financial statements were fairly

stated when they were materially misstated

Why is there at least some level of audit risk on every audit engagement?

When auditing we must choose the method. This process is through selecting a number of samples

and based on the results of the evaluation of those selected samples to draw conclusions for the

whole. Therefore, it is always possible to make wrong conclusions.

Second, any financial audit is limited by factors such as time, cost, limited resources, management

or limits from the auditor. Auditors and auditing companies cannot fully check on all

items, operations and cycles related to auditing objects.

Third, audit risks related to business risks. Businesses all face business risks. Auditing risk is a

business risk that auditing companies must consider while providing auditing services.

Thus, deriving from the above reasons, we can see the importance of the classification of risk

levels and audit risk assessment in the audit process. A good audit risk assessment will help

auditors build inspection procedures

proper accounting and auditing planning, ensuring a full collection of credible evidence for

comments on financial statements.

Question 5-3: How does the prudent person concept affect the liability of the auditor?

the prudent person concept states that A person is obliged to perform reasonable and diligent care

in fulfilling obligations with others. Therefore, the auditor expects to conduct an audit by using

timely care, but does not claim to be a guarantor or insurance company of financial statements.

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Homework – Chapter 4 & 5 07/25/2019 Group 6

Question 5-5: What is meant by contributory negligence?

A legal protection auditor is an auditor who declares that the customer does not perform certain

obligations and that the customer does not perform such obligations has caused the damage

claimed.

Under what conditions will this likely be a successful defense?

ontributory negligence used in legal liability of auditors is a defense used

by the auditor when he or she claims the client or user also had a responsibility in

the legal case. An example is the claim by the auditor that management knew of

the potential for fraud because of weaknesses in internal control, but refused to

correct them. The auditor thereby claims that the client contributed to the fraud

by not correcting material weaknesses in internal control

Successful defense is used by auditors when they require customers or users to also be responsible

in legal proceedings.

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Homework – Chapter 4 & 5 07/25/2019 Group 6