Discuss about the Provision of Non Audit Services.
There is a conflict of interest which arises if an auditor is asked to perform two contradicting functions i.e. of an audit as well as an employee of the company. An auditor is a professional who is independent to the company and a director is one who is an official of a company , thus if the same person acts as the auditor as well as a director of the same company then a self review and self interest threat arises. Section 240.146 of the APES 110 states that it does not matter whether the auditor acting as a director is active or non-active (APESB, 2010). Thus in this scenario Katrina NG will either have to step down from the position of an auditor in order to act as the director or vice-versa.
An auditor is the one appointed to ensure that the company is keeping its books of accounts as per the standards and requirements of the law. He is the one who catches the mistakes done while making the book-keeping entries or any fraud conducted by the management. Therefore a professional although capable performing the function of audit as well as non-audit functions such as bookkeeping should not do the same as his independence and objectivity become questionable (icaew.com., 2012).
But, if the same person performs both the tasks, then as per the Combines Code of Corporate Governance, the company’s audit committee should re-check the work performed by Peter in this case.
Advertisement of one’s professional work is permissible as per the standards pronounced by the institute, but limited to the institute’s journals and newsletters. Therefore publishing of jazzy advertisements along with mentioning the details about the audit staff and mentioning misleading statements such as ‘help the clients gain higher tax deductions ‘ is an incorrect manner. Therefore Hornsby Auditors have violated the rules of ethical conduct by giving such advertisements and mentioning such statements (cpaaustralia.com., 2014). Therefore in order to rectify their mistake they should immediately withdraw such a commercial and give a decent advert in the newsletter and ournal that are issued by the institute so that their act does not bring disrespect to the profession.
An auditor can commence the work of audit of a client even if his previous dues are pending. The AICPA mentions that the final audit report in such a situation should be issued only once the past dues are paid off (ethicsboard.org., 2012).
Thus in this scenario, David Cheadle has acted as per the provisions by commencing the audit even if the previous dues were pending. However he should further ensure that until and unless his dues are cleared, the final audit report should not be handed over to the client.
Therefore in the particular case, David Cheadle has not contradicted any provisions of the act by commencing the audit work of the client. But at the same time should ensure that the past dues are cleared before the audit report is issued.
APESB, (2010), APES 110 Code of Ethics for Professional Accountants, <https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf>
cpaaustralia.com., (2014), An Overview of APES 110 Code of Ethics for Professional Accountants, Available at https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/ethics/an-overview-of-apes-110-code-of-ethics.pdf (Accessed 27th January 2017)
ethicsboard.org., (2012), Revised Code of Ethics – Completed, Available at https://www.ethicsboard.org/projects/revised-code-ethics-completed (Accessed 27th January 2017)
icaew.com., (2012), The provision of non-audit services to audit client, Available at https://www.icaew.com/en/technical/ethics/auditor-independence/provision-of-non-audit-services-to-audit-clients (Accessed 27th January 2017)