What Went Wrong in the Audit of Tri-Pack Films Limited?

• Published in: Asian journal of management cases Vol. 17; no. 1; pp. 36 - 51
• Main Authors: Haroon, Omair, Ali, Waqar, Dar, Atifa A.
• Format: Journal Article
• Language: English
• Published: New Delhi, India SAGE Publications 01.03.2020
• Subjects: audit risk assessment; Audit; audit quality; restatements
• ISSN: 0972-8201; 0973-0621
• DOI: 10.1177/0972820119892719

This case looks into an instance of an audit failure in the context of a Pakistani listed company, Tri-Pack, whose financial statements for the year 2014 showed a material misstatement (which reduced 2013 profits after tax by around 88%). This led to an investigation by the regulator (Securities and Exchange Commission of Pakistan) into the audits across 2012–2013, culminating into a stern warning being issued to the engagement leader (partner) for having failed to exercise an attitude of professional scepticism, failed to perform the audit to obtain reasonable assurance around Tri-Pack’s financial statements being free from material misstatement either due to errors or fraud and failed to bring out material facts about the affairs of the company and make a report to the shareholders thereof1. The case hones in on the audit dynamics and defence presented by the audit firm (A.F. Ferguson & Co. Chartered Accountants) for the year 2013, to assess the shortcomings in the conduct of the audit of Tri-Pack’s financial statements for that year’s end. It stimulates the work of an audit quality head who reviewed Tri-Pack’s audit file in order to ascertain whether the objectives of the audit were met and what lessons can be drawn to leverage towards future audit engagements.