Advantages
(1) They give a framework for all audits around which a particular audit can be developed.
(2) They help to standardise the approach of all auditors to the common objective of producing an opinion.
(3) They assist the court in interpretation of the concept of ‘due professional care’ and may assist auditors when defending their work.
(4) They increase public awareness of what an audit comprises and the work behind the production of an audit report.
(5) They provide support for auditors in potential disputes with clients regarding the audit work necessary.
Disadvantages
(1) It may appear that they impinge on, rather than assist, professional judgement.
(2) They are considered by some to stifle initiative and developments of new auditing methods.
(3) They may create additional and unnecessary work and thus raise fees, particularly in the audit of small companies.
Consequences
If auditing standards were to be enforceable by statute it would mean that there would be government intervention in areas currently controlled solely by the profession itself. This might ultimately lead to a diminished role of self-regulation. To be enforceable by statute the standards would have to be applicable to all circumstance and thus need to be very general and broad in their instructions. This might reduce their usefulness to the auditors. Auditors might spend unnecessary time ensuring that they have complied with the law rather than considering the quality of service to their clients.
Finally, it should be considered whether full statutory backing for standards would force auditors into narrow views and approaches which might gradually impair the quality of accounting and auditing practices.

The file of copy credit sales invoices is the most pertinent evidence which the auditor can obtain of the credit sales figure in the accounts. This is because the sales figure is built up from the individual sales which the copy sales invoices represent.
The auditor’s assessment of its validity as evidence will however depend upon the degree to which it is supported by other evidence. It is a general rule that documents created within the organization, such as the copy invoices, form weak audit evidence.
The auditor may for example assess the internal controls designed to ensure the completeness, accuracy and validity of sales invoices in the file or seek evidence from outside the organization such as customers’ remittance advices.

The most pertinent evidence which the auditor could seek would be stock returned and credit notes issued after the year end in relation to the garments in the hands of customers at the year end. However, because of the tight deadline for the audit the auditor will have to rely on calculations of expected returns based on previous experience. In order to accept the validity of this evidence the auditor would check the calculations and confirm that they were made on reasonable assumptions about trends in the numbers of dresses accepted by customers and any problematical styles.

When considering the acceptability of a certificate from a third party as audit evidence the auditor would be influenced by the following.
1) the fact that the evidence is documentary;
2) the fact that it has come from a third party, particularly if it has been sent directly to the auditor by the third party;
3) the integrity of the third party implied by his status or by his membership of a profession. For example an auditor would place more reliance on a statement from a bank manager than one from a member of the general public;
4) the qualification of the third party relating to the subject on which he certifies;
5) the independence of the third party from the client;
6) any unusual disclaimer made in the certificate;
7) the extent to which the certificate is supported by other evidence.

1) the controls operating over the costing records;
2) documents such as purchase invoices supporting material individual entries in the costing record for the office;
3) the calculation of overheads included in the cost of the office, which must not include any element of profit;
4) an independent valuer’s opinion may be obtained if other evidence is not sufficiently reliable;
5) the amount for which the building is insured;
6) confirmation of cost and method of costing in the letter of representation.

(1) Internal Control
In a large company audit it will normally be possible to rely extensively upon internal controls as a sophisticated internal control system will exist. On the other hand a small company will not need such a complex system so the auditor will not be able to obtain evidence from the operation of internal controls.
(2) Substantive testing
Large companies will have a very large number of transactions, so it will not be practicable to rely entirely on substantive tests. A small company will, however have a small number of transactions and the auditor will be able to rely on the evidence of substantive tests.
(3) Involvement of directors
The directors of a large company will not be involved in the detail of the operation. Therefore in order to assess the reliability of any representations they make the auditor must assess the reliability of the reports they receive from the managers.
In a small company the directors will be involved in the day to day running of their company, so their representation will be based on a detailed knowledge and understanding. It may also be possible to rely to some extent on the supervision they exercise over the company’s accounting. An assessment of evidence from the directors of a small company will therefore depend among other things upon an assessment of their integrity, and on supporting evidence from other sources.

Between the year-end date and the date the auditor’s report is signed, the auditors shall perform audit procedures which will identify and detect all material subsequent events which require adjustment of or disclosure in the financial statements.
Additional audit procedures are not required where satisfactory audit evidence has been gained.

The auditor has no obligation to perform any audit procedures between the date the auditor’s report is signed and the date the financial statements are issued.

However, if a fact becomes known that would have influenced the auditor’s report had the auditor known it at the date the auditor’s report was signed then the issue shall be discussed with management to determine whether the financial statements need amendment.

Where the financial statements need amending, additional audit procedures shall be conducted on that area and the original subsequent events review extended to the date of the of the new auditor’s report which will be issued.

If management refuse to amend the financial statements and the auditor’s report has already been provided to the entity, and if management intend to issue the financial statements with this report, the auditor shall take steps to prevent reliance on the report. This might include speaking at the AGM or resigning.

Observe the inventory count in order to determine whether the inventory exists. Enquire of management whether any inventory is held for third parties.
Obtain a copy of the completed inventory sheets. Select a sample of items and physically verify that the products listed on the inventory sheets are in the warehouse.
For the raw materials delivered on the day of the count, discuss with management whether these goods relate to the year being audited, or whether they are to be included in the post year end period. Trace these items through to the final inventory figures to ensure they have been recorded in the correct accounting period.

For a sample of product lines in the warehouse, verify that they have been included on the inventory sheets and that the quantity is accurately recorded.
Perform a sequence check of all inventory sheets to ensure that they have all been resumed to the warehouse manager at the end of the inventory count, so that all product lines are included in the year-end inventory quantity.
Enquire of management whether there are any items of inventory held off site which have not been included in the inventory sheets.

For a sample of finished goods sold post year end, compare the sales price to the current price list or catalogue in order to check items are being sold at a price which is greater than the item’s cost.
For a sample of items classified as work in progress at the year end, ask management how they have determined the percentage completion at the year end. Recalculate the costs incurred to date. Compare this to the future selling price of the completed item less the costs to complete in order to determine the net realisable value of the item. Trace through the final valuation of the item to the financial statements.
Review the inventory movement records to identify any particularly slow moving inventory lines. Discuss the saleability of these items with management and enquire whether any provision has been made in order to write the item down to its net realisable value (also check whether damaged inventory identified by Cermaicz Company during the count has been written down to its net realisable value).

The issue to be determined is whether Prime Company Ltd. is estopped from denying that Maxwell Mensah held himself out as a director of the Company, even though he was not appointed a director.
For the following reasons, Prime Company Ltd will not be justified in denying Maxwell Mensah as a director of the Company;
i) The Company allowed Maxwell Mensah to transact the fish business with Addae Company Ltd. and third parties, on its behalf, and also received payments.

• That means that the Company necessarily conferred an implied authority on Maxwell.
• It further demonstrates the kind and nature of the authority exercisable by Maxwell as a director held out by the Company.
  ii) The Company allowed Maxwell Mensah to share in its profits.
  iii) Section 198(1) of the Companies Act, 1963, (Act 179) provides that, “Every Company shall in all trade circulars and business letters on or in which the Company’s name appears state in legible characters with respect to every directors,……..”
• In compliance with this requirement, the Company printed the names of its directors on all its letter heads and among the directors was Maxwell Mensah.
• It showed that although Maxwell Mensah was never appointed a director, the Company, however, held him out as such.
                                                                                                                                            (3 points for 3 marks each= 9 marks)
  From the above it is to be stated as follows:
• As between outsiders such as Addae Company Ltd. and Prime Company Ltd., the Company was bound by all the acts done by Maxwell Mensah in relation to Addae Co. Ltd., including receiving payments on behalf of the Prime Company Ltd, so far as the transaction is within the scope of his office as director.
• See the Rule in the case of Royal British Bank Vrs Turquand (1856) 6 E 1& BI. 327, where it was stated that “ person who entered into contract with a company and dealt in good faith with that Company, had the right to assume that acts within the Constitution and powers of the Company had been duly and properly performed. Such persons were under no duty to enquire whether acts internal preliminaries and management has been regularly performed”.
• See also the case of Re: County Life Assurance Co. (1870) 22 L.T 537 at page 538-539, where Gifford L.J explains as follows.
• “ The company is bound by what takes place in the usual course of business with a third party, ……….. provided that, ………… the third party deals fairly and bona fide ………. with persons who may be termed de facto directors ………. that is to say, persons who might very possibly have been de jure directors”
• In the circumstance of this case, the acts of Maxwell Mensah, though an improper director, were binding on Prime Company Ltd. because no steps were taken by the company to stop Maxwell Mensah removed.
• See Section 179 and Section 179(2) (a) and (b) provide as follows:
• “ 179(2) Any person, not duly appointed director of a company:
• who shall hold himself out or knowingly allow himself to be held out as a director of that company, or
• on whose direction or instructions the duly appointed directors are accustomed to act, Shall be subject to the same duties and liable as if he were a duly appointed director of the company…………”
• Maxwell Mensah, having allowed himself to be held out by the Company as a director, was in law subject to the duties and liabilities as a director. He successfully transacted the business of Prime Company Ltd with Addae Company Ltd, who acting in good faith, assumed that when the Company held him out as a director, he was in fact appointed in accordance with the Regulations of the Company. Prime Company Ltd will, therefore, not be justified in denying Maxwell Mensah as director of the Company, as the Company itself held Maxwell Mensah out as a director.
                                                                                                                                           (3 points for 3 marks each= 9 marks)
                                                                                                                                       (2 marks for Professional Presentation)

• The terms of a contract are classified as conditions, warranties, or innominate terms. Parties will usually designate which classification a contract term falls. Breach of condition of a contract can constitute a breach of the contract as a whole. This may allow the non-breaching party to sue for damages as well as rescission of the contract.)
• An owner who let out a chattel on hire must take reasonable care to see to it that it was in a reasonably fit for the purpose condition for which the bailee was to use it; the owner would impliedly warrant the suitability of the chattel for that purpose, and was liable to the bailee for breach of the warranty.
• In the instant case, there was indeed a breach of implied warranty, and which would not have resulted in the repudiation of the contract. Therefore, Kojo Atua rightly sued for damages.

• The issue arising in the question is whether the Court rightly awarded the special damages of GH¢ 20,000.00 to Kojo Atua for failure of consideration.
• A claim for money had and received was not maintainable if the contract had been partly performed and some benefit has been derived from the part performance.
• In the present case, the evidence clearly showed that although the tractor was defective and operational at a rate substantially below the declared capacity, it did some work, having hauled a total of 60th logs.
• The Court erred in law in basing the award of the special damages on a total failure of consideration. There was part performance, and for which reason one cannot say that consideration had failed.

• Loss of confidence.
• Delay in completion of audit.
• Lack of infrastructure.
• Inexpertise.
• Negligence.

Audit committees focus on rules and compliance and also to ensure accurate and transparent disclosures. In assisting the board to discharge its responsibility and act with due care, diligence and skill, key functions of the audit committee involve,

• Financial Reporting and Disclosures – The committee must be aware of the financial reporting risks to focus its attention appropriately. This oversight include, reporting of financial information to users of financial reports, application of accounting policies and effective financial management system
• Oversight over System of Internal Control – This includes business policies and practices; protection of company’s assets. Providing assurance and a formal forum for communication between the board of directors and senior financial management on internal control.
• Risk Management System Review– Whilst the company’s system of internal control is designed to help mitigate risk. The audit committee focuses on review of financial reporting, fraud, risk assessment and compliance.
• Culture Compliance – Compliance with applicable laws, regulations, standards and best practice guidelines. The audit committee must recognize how critical the right tone at the top is. The company is required to ensure discipline in the boardroom as well as among employees.
• Oversight of Management and Audit- Facilitating the maintenance of the independence of the external auditor. Facilitating communication between the board of directors and the internal and external auditors; providing a structured reporting line for internal audit and facilitating the independence of the internal auditor (if the entity has an internal audit function). Consideration of significant matters that were raised during the audit process.                                                                                                                                                                                                                                                     (Any 4 points)

i) The Board is dissolved forthwith.
ii) The functions of the Board cease and transfers to the liquidator. The liquidator does not run the company as a going concern.