The following scenario relates to question 1 – 5
You are an audit senior of ABC & Co and have worked on the external audit of FND Co (FND), an unlisted company, since your firm was appointed external auditor two years ago.
FND owns a chain of nine restaurants and is a successful company. FND has always been subject to national hygiene regulations, especially in relation to the food preparation process. Noncompliance can result in a large fine or closure of the restaurant concerned.
The board of FND has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.
With this in mind, the board has asked your firm to conduct a review of FND’s compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.
The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.
1. Despite running a successful company, FND’s board has often needed to be reminded of some fundamental principles and you often have to explain key concepts.
Which of the following statements best defines the external audit?