He further argued that it was the only option they had at the time Sarah

He further argued that it was the only option they

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suggested the need for making smaller payments to avoid drawing unnecessary attention. He further argued that it was the only option they had at the time. Sarah questions the CEO on his stance on the money that was still being paid to Premintel, and requested for unlimited access to the company’s systems. 5. Have the two audit partners, Patrick and Sarah, exercised their duty of care as the auditors? If your answer is ‘yes’, please explain two reasons why. If your answer is ‘no’, please explain two reasons why and what he, or she, should have done differently? Sarah Hancock’s and Patrick Lyon’s duty of care as the auditors arise from the existing connection between TYSL Accountants, where they are partners, and D-MERTON, their client. Both Sarah and Patrick as outlined in the case study have duly exercised their duty of care to
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FALSE ASSURANCES 7 their client by thoroughly scrutinizing various leads, which could result in the discovery of impropriety, fraud, and possible material misstatements. By tradition, the Courts of law have limited Patrick’s and Sarah’s duty of care to entities and persons past D-MERTON owing to the policy concerns, which encircle assumed liabilities (Knechel & Salterio, 2016). In light of this, both Sarah and Patrick are not required by law to owe a duty of care to third parties; in particular, third parties who may use the audit statements and financial reports when making investment decisions. What is more, circumstances that might contradict uncertain liabilities do not exist for Sarah Hancock and Patrick Lyon. The reasoning is based on the fact that they were not engagement partners during the previous audit processes. Based on these reasons, it is prejudicial to assume that Sarah Hancock and Patrick Lyon owed a duty of care to the firm. References Arens, A. A., Elder, R. J., & Mark, B. (2012). Auditing and assurance services: an integrated approach. Boston: Prentice Hall. Bell, T. B., & Griffin, J. B. (2012). Commentary on auditing high-uncertainty fair value estimates. Auditing: A Journal of Practice & Theory, 31 (1), 147-155.
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FALSE ASSURANCES 8 Christensen, B. E., Wood, S. M., & Wood, D. A. (2012). Extreme estimation uncertainty in fair value estimates: Implications for audit assurance. Auditing: A Journal of Practice & Theory, 31 (1), 127-146. Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Taylor & Francis. William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic approach. McGraw-Hill Education.
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  • Fall '15
  • Mr. Njoroge
  • TYSL Accountants

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