(a) As per APES 110 while conducting Audit of company the audit firm is required to obtain reasonable and adequate assurance by collecting more information about the financial position of the company. These document or information collected by the company is required by auditor to form an opinion on the financial statement of the company (Carey, et. al., 2014). But the auditor is under legal obligation of not to disclose the clients information collected during conducting audit.
In the above case Mortdale Accounting firm has conducted audit of several public companies and collected sensitive information about their business while conducting audit which the auditor is required to keep confidential. It has now given the custody of the working papers to Peshurst Accountant who is conducting peer review of the Mortdale Accounting firm. Mortdale is not allowed to do so with the prior permission of client whose audit is done by it. Therefore Mortdale has breached the ethical requirement of Apes 110
(b) In the above case the Jan Dungog CPA has reached the local accounting firm without the knowledge of current employer and the local accounting firm too hires him without intimating the current employer. This is complete breach of ethical requirement of APES 110 (George, et. al., 2014). The local firm should have contacted the current employer about the fact of hiring their current employee. They should have obtained information about the Jan Dungog and his past performance in the company before hiring him.
(c) A Chartered Accountant is deemed to be of professional misconduct if he solicits the client whether directly or indirectly by any advertisements, personal communication, circulars, and visiting cards. He cannot advertise himself inform of his client or client of other auditor.
In the above case Wendalsailor, a Chartered Accountant is advertising the insurance service and gratuity service provided by him. This is a complete breach of the ethical requirement of APES 110. A Chartered Accountant cannot advertise even himself in front of other clients.
(d) In the above case Judith Durham is in the Board of Directors. It is also given that she is just in the honorary position and does not get involved in the management. An audit firm is disqualified to being appointed as an auditor of the firm if any member of that firm is the employee of the firm in which the audit firm is being appointed as an auditor (Davenport & Dellaportas, 2009). But Judith Durham is the director of the company and that too is an honorary position which does not involve any management task. Therefore in the above case there is no breach of ethical requirement of APES 110.
( e ) A chartered Accountant Maintain a confidential relationship with the client and provide assurance that all the confidential data acquired by him from the client related to his business should not be disclosed by him. A Chartered Account is legally obliged to do so.
In the above case Ernie Dengate sell his accounting practice which includes bookkeeping, tax and auditing. He obtained permission to release tax working paper but does not obtained permission for others. He is in breach of ethical requirement of the Apes 110 because he should have obtained the permission of client regarding release of working papers of taxation and auditing that related to their company and can contain some confidential and sensitive data.
(f) A chartered accountant can provide the Auditing service, Represent the client as tax consultant, and provide management service as management consultant. But a chartered accountant cannot re-appointed as auditor of the company where the Chartered Accountant has business relation or providing professional services whether directly or indirectly with the company, associate company, its holding company, its subsidiary company. Professional service includes management consultancy service and taxation service (Gay & Simnett, 2000).
In the above case Fred Nerk is providing taxation service and management consultancy service to its client and therefore cannot provide the auditing service. There will be breach of ethical requirement in the above case.
(g) In the above case the all good Chartered Accounting firm maintain its record on various computers. Now it is conducting audit of the company which does not maintain its accounting record due to lack of computer facility in their office. The all good Chartered Accounting company is provide the company some help and letting them use their own computer for maintaining the accounting records.
In above case no professional service is provided by the Chartered Accountant firm to its client as they are not charging them any monetary compensation for letting them use their computer (Elder, et. al., 2011). No breach of professional requirement as per APES 110 has been found in the above case. However the company should legally maintain their accounting records at the head office or give the proper address to the legal authority where accounts are kept by the company.
(h) In the above case the Chartered Accountant James Jameson has been drinking for too long at the Christmas party. Later on he got indulge in a fight with some other person at the hotel and arrested by the police. Such a behavior has badly insulted the Chartered Accountant profession and the goodwill of the firm is also affected in the negative way. Later on he is charged will an offence involving moral turpitude and is imprisoned for 3 month and his license also suspended for 1 year. A chartered should not involve in illegal activities and there is a breach of the professional requirement as per APES 110.
(a) Disclaimer opinion is expressed by the auditor in this case as he is unable to obtain sufficient and appropriate evidence that is required to form his opinion (Christensen, et. al., 2012). In the above case auditor failed to get conformation from eight large customer of client that are included in the sample which is created while creating the audit plan.
(b) The property plant and equipment comprises 35% of the total asset of the company which is considerable a large portion of company. Examining this portion of the company can materially affect the report of the auditor. Therefore the auditor is required to give disclaimer opinion in the above case as the auditor cannot acquire all the reasonable and adequate evidence required to form an opinion.
(c) It is the duty of those who are in charge with the management of the company to prepare the financial statement of the company and too made available to auditor of the company at the time of audit. The financial statement should contain all the information they could materially affect the opinion of the auditor (Elder, et. al., 2011). Contingent liability form part of financial statement as the required law. Therefore hiding them will be invalid and legal from auditor’s point of view. The auditor in the above case can give qualified report.
(d) It is the duty of the management of the company to prepare and implement a sound internal control system. The auditor will plan his audit procedure on the basis of the internal control set by the company. In the above case auditor cannot find the appropriate audit evidence which is required by him to give an opinion. Therefore in the above case auditor is required to give disclaimer opinion.
(e) In the above case auditor has not find any material misstatement in the financial statement of the client. At the end of the audit the client refuses to give the opening balances of his business which is illegal. Client should provide all the necessary information to the auditor when asked. There is no valid reason for the not obtaining the required information, it is due to the intentional refusal of client. Qualified opinion should been given in this case.
(f) An audit is conducting by an auditor to find out that the financial accounts are prepared as per the related laws and are not misleading the general public. As the auditors find out that the whole company is not following the Australian Accounting Standard. This could lead to serious misstatement of the financial account. Adverse opinion is required to be given in this kind of case.
(g) Inventory is a material component of financial accounts and false valuation could lead to serious misstatement (William & Prawitt, 2016). In the above case client is following LIFO method which is disallowed by the Australian Accounting Standards. Here the auditor is required to give qualified opinion for its client’s financial statement.
(h) The auditor’s responsibility is to check that the accounts of the company are prepared as per the accounting standard and the financial statement does not give a fake view of its present situation. It is not the duty of auditor to predict the company’s future and give investment advice to the general public. The auditors should restrict its work to checking the financial data of company. Auditor is required to unqualified opinion in the audit report prepared by him because there is not any material misstatement in the financial statement of the company.
Carey, P. J., Monroe, G. S., & Shailer, G. (2014). Review of post-CLERP 9 Australian auditor independence research. Australian Accounting Review.
George, G., Jones, A., & Harvey, J. (2014). Analysis of the language used within codes of ethical conduct. Journal of Academic and Business Ethics.
Davenport, L., & Dellaportas, S. (2009). Interpreting the public interest: A survey of professional accountants. Australian Accounting Review.
Gay, G. E., & Simnett, R. (2000). Auditing and assurance services in Australia. Sydney: Mcgraw-hill.
Elder, R. J., Beasley, M. S., & Arens, A. A. (2011). Auditing and Assurance services. Pearson Higher Ed.
Christensen, B. E., Glover, 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.
Elder, R. J., Beasley, M. S., Arens, A. A., & Jusuf, A. A. (2011). Jasa audit dan assurance. Salemba Empat, Jakarta.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic approach. McGraw-Hill Education.