Breach of Ethical Requirements of APES 110
A.The given case is related to the Principle of integrity as well as the Principle of Confidentiality. The principle of Confidentiality states that the auditor is required to preserve the secrecy of all the documents which is obtained by him during the course of the company’s audit. The disclosure or sharing of the verbal materialistic information with any person should not be performed under any circumstances. These are the sole property of the client. The auditor needs to be honest in all the functions which he performs based on the principle of integrity.
The situation which has been provided clearly states that the accounting firm is responsible for the confidential information to another audit. This is more serious as this disclosure has been done without any sort of permission from the client. It is clear that the principle of confidentiality has been breached where the client has not been informed about the review activity of the peers.
B.Based on the principle of professional behaviour, each member or every auditor of the Institute of the Certified public accountants is required to follow a particular code of conduct which the institute has prescribed and under no circumstances is the spirit followed or maintained.
In case the auditor does not follow the required rules as well as the spirit the chances for him being held as guilty for misconduct of a professional nature. The situation which has been provided is related to that of Jan Dungong, who has applied to the other accounting firms. He resists the contact with the employer in order to contact and search for the details related to the employer before. This would be related to the breach of the principle of professional behaviour.
C.Any auditor on the occasion of not following the objectivity principles he might be liable for the purpose of professional misconduct. The principle of objectivity states that the company auditor needs to be careful in the framing of the opinion on the fiscal statements of the company who cannot be convinced in any manner. This is related to the issue that he might or might not have received from the particular client (Tsahuridu 2014).
The given case is related to that of Wendal Sailor. He is a Chartered accountant who is engaged in the auditing services which possesses the business of the insurance as well as the superannuation. On the occasion of visit to the client for audit purpose, he resolutely begins the conversation related to the insurance as well as the superannuation. He also tries to convince the people to get it from him. This way he is responsible for violating the code of conduct and is bound to be held for misconduct of professional nature.
Types of Audit Opinion
D.According to the principle of objectivity, the auditor of the company cannot be in a direct or indirect connection with the client for whom he is required to conduct the audit and also frame the opinion of the fiscal statements. This is defined as the code of ethics.
In connection to the code of ethics it can be said that it has been so regarded as the relation which may have the effect of receiving the economic declarations of the company which are validated with undue and unfair means.
The given circumstances state that Judith Durham is the partner of the audit firm who is responsible for the performance of audit conduction. She holds the position of the director on the firm. However she does not actively take part in the management of the company affairs. There might be chances that the audit objections are cancelled or routed due to her board presence. There is also a possibility of cancellation of the conduct of the audit. Ever greater amount of manipulations could have occurred. It can safely be concluded that there has been a breach of the principle of objectivity.
E.The auditor is not required to disclose, share or make known any of the documents or information which is mentioned in the books or other personal accounts without any sort of permission from the client who has asked for the services of the auditor. This is in compliance with the code of conduct related to confidentiality. Documents can be shared in case it is essential to the law operations.
In the provided case, Enrie Dengate is selling the practice to Jago, the new accountant who is responsible for ensuring that all the future work is done. After selling the practice to Jago, permission for the transfer purposes has been received by Enrie. Only the tax working paper has been excluded and has transferred without getting a correct amount of permission for it. It clearly shows that the principle of confidentiality which has been avoided as well as dishonoured in an improper way (CPA Australia Official Website 2014).
F.A company auditor is not allowed to cater to client with audit services as also the services of accounting. This is related to the principle of objectivity. It also covers book keeping, filing returns, management advisory and also the tax services. In case the different forms of services are provided with the audit services, then the objectivity principle would be violated. This is because the auditor will not be able to give the true as well as fair opinion but will rather be posted under Self review threat.
The given situation clearly states that, Fred Nerk is responsible for providing the services of audit which is also with taxation and management consultancy services. On the occasion that opinion of the auditor is framed at the time of the audit will be affected by Self Review Threat. Therefore the objectivity and the auditor independence of the auditor will be hurt.
G.Pertaining to the principle of professional independence and also due care, the company auditor shall have a particular system in place which ensures that the firm has installed the required system along with the new as well as innovative technologies which are related to the present work of the nature of accounting, tax and so on. The work is to be completed with the team of chartered accountants who are well qualified and also the tax experts. On the occasion that the audit firm does not have a particular system then there might be a breach of professional competence as well as due care.
In the current situation, the All-good chartered accountants firm is responsible for the maintenance of the system which involves the audits of the branch company. However it has been observed by the client that the company does not have the ability to perform the conversation in an efficient manner and the required infrastructure has not been available for the work. There is the ultimate breach of the principle of professional competence as well as care (Bedard 2010).
H.Based on the code of conduct defined in case any chartered accountant is found to be engaged in any sort of illegal practices, or in the occasion that he has been held in prison for an elongated period of time. In this situation his license is also suspended temporarily for a certain number of months or by years by any specific court.
Based on the provided situation, James a public accountant fought in a hotel in a very rude and ill behaved way in a complete drunken state which is not to be ignored in the case of the Chartered accountant. Due to this, he has been imprisoned for 3 months and his licence has been suspended for 1 year. Therefore under these circumstances, he is to be held as guilty due to his unprofessional behaviour as well as severe misconduct.
A.Based on the provided case, the auditor will provide a clean report and it will also provide an unqualified opinion. This is because, despite the fact that the auditor was incapable of obtaining the confirmations. It was also due to his inability to tally the customer balance as mentioned in the books of the company accounts with the supported bills or invoices which have been able to perform the procedures of audit that have assisted him to get a reasonable amount of assurance that the correct from of accounting has been made and the fiscal declarations have been made in a true and fair way which provides a genuine view of the fiscal position and performance of the company. Thus unqualified opinions will be issued by the auditor.
B.The provided case helps state that the auditor will provide an opinionated disclaimer while issuing the audit report. This happens on occasions when the client restricts the objectivity of the auditor by not providing relevant documents or clarifications or knowledge according to what the auditor requires. This might also involve allowing the auditor to perform extra procedures. The auditor is restricted by the client to check the most important item of property plant and equipment. Thus the scope of the auditor is restricted and hence the disclaimer of opinion is issued by the auditor (AASB Official Website 2013).
C.The auditor is responsible for issuing the adverse opinion in his audit report. This is due to the fact that the auditor at the time of framing the audit gives an adverse opinion. This is issued on his discovery of the fact that material facts have remain undisclosed by the company intentionally. This non disclosure results in the suspicions in the auditor’s mind for further issue of the adverse report. In the given case if contingent liability has not been mentioned, in the account notes, then there will be an issue with the actual liability. Keeping this in mind, the adverse report has been issued by the auditor.
D.In the present scenario, the auditor is incapable of verifying the retail sales of the client in question as the internal control connections for the verification of sales transactions are very weak in the company. This depicts that cash sales transaction records are not being made on a regular basis. In such a scenario, the auditor is not left with any techniques which can be applied to assure oneself about the record of the cash sales which are recorded in the company books are verifiable and it is easy to verify it along with the sale invoices. The auditor if restricted will issue the opinion disclaimer.
E.The auditor is incapable of verification of the opening balance of the company. It has been clearly denied by the client regarding the company provisions of the detail of the opening balance. Even if the auditor is satisfied with the entries made in the books or accounts of the company for the present fiscal year under the purpose of audit it has been found that no material misstatements have occurred. The non availability of the opening balance and the verifiable documents caused the auditor to issue a report.
F.In the present scenario, the company has operated for the last four years. The company has not been following the standards of accounting. As the company does not follow any specific sort of accounting standards, the auditor will issue the adverse opinion on the fiscal declarations of the company as it has the chance of revision of its fiscal statements and also for getting the audit report revised with unqualified opinion.
G.The LIFO method of valuation of inventory is strictly disallowed by the Australian accounting standard and the international reporting fiscal standards. The utilisation of the method has a serious impact on the fiscal statements of the company. The auditor issues the Qualified and Adverse opinion on the fiscal statements of the Company.
H.Though the auditor has not justified any material misstatements which might affect the fiscal misstatements of the company. There exists a material fact that challenges the fiscal statements so prepared. The company’s going the concern assumptions will be hampered. The auditor will issue a qualified opinion.
References:
Tsahuridu E,(2014), “An Overview of APES 110- Code of Ethics for Professional Accountants”, available at https://www.apesb.org.au/uploads/meeting/board_meeting/24112014043919_agenda-item-16-f-cpa-australia-s-overview-of-apes-110.pdf accessed on 24/05/2017
CPA Australia Official Website, (2014), “A guide to Understanding Auditing & Assurance” available at https://www.cpaaustralia.com.au/~/media/Corporate/AllFiles/Document/professional-resources/auditing-assurance/guide-understanding-audit-assurance.pdf accessed on 24/05/2017
AASB Official Website, (2013), “Forming and Opinion and Reporting on a Financial Report” available at https://www.auasb.gov.au/admin/file/content102/c3/Jul13_Compiled_Auditing_Standard_ASA_700.pdf accessed on 24/05/2017
Bedard, J.C., 2010, Audit quality indicators: A status update on possible public disclosures and insights from audit practice Current Issues in Auditing, 4(1), pp.C12-C19.
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