Violation of Ethical Standards and its Impact on Auditing

1.a)  Due to professional ethics, the practicing firm, without taking permission from their clients, cannot reveal the collected information of assurance procedure and audit related to them, which in turn has violated the basic requirements of APES 110.

Trough conducting audits on numerous companies undertaken by the government, the Mortdale accounting firm has gathered clients’ working papers. The concerned company, during the assurance procedure, has collected information for Penshurst accounts regarding the purpose of peer review to carry out assurance activity related to them (Trung 2015). This company has shared this information though they have been provided those to operate the firm’s working procedure and to analyze about the necessities regarding the procedure to carry out audit for fulfilling, while those cannot be shared without clients’ permission. Hence, before giving working papers to the company’s peer reviewer, it is essential for Mortdale to take prior permission from its clients.

b) In this context, the CPA has breached the ethical requirements related to APES 110. This is also violated by accounting firm as well. Instead of depending on the candidate’s word, where the candidate is applying to the entity, the accounting firm can try to gather information about some past engagements relating to the client (Payne, Corey and Raiborn 2018). It is also essential to know about the applied person’s interests that whether these are going to make any conflict with organization’s objectives. 

Hence, before offering her job in this organization, it is important for the local accounting firm to conduct a research on Jan Dungog, a CPA. Thus, the firm can try to collect information from her past employer about the reason of leaving the past job. By doing so, the concerned firm can gather actual information about the actual reasons regarding the dissociation of the candidate based on her previous job and also can gather information about the concerned candidate’s strength and weakness. Thus, at first, the new hiring firm needs to contract with the past employer of jan Dungog, before hiring her for the particular position.

c) In this part, the ethical requirements have also been breached by the practicing accountant, as well. This is because, the person is not allowed to request his clients to engage in other activities and also to advertise about other services that the accountant is going to provide (Jaber and Fadda 2016). Being a professional accountant, the person needs to remain independent about his opinions and objectives, where other external factors cannot influence him at the time of assurance services and audit. Otherwise, due to this activity, a biased opinion can be generated regarding the true position of the organization towards his stakeholders.

Non-Qualified and Qualified Opinions in Specific Situations

In the given case, Wendal Sailo has also followed the same steps by offering other services, through contacting the firm, where he is going to provide audit along with assurance services. Here, the concerned person is offering other services except of providing only audit option before offering final audit option of his for the entity. According to the professional account, this step is violated the ethical standard as it may affect the independent opinion formation based on actual scenario regarding the engaged firm for exchanging other benefits provided by the associate.

d) In this case, the partner is operating the audit for a Non Profit Organization for which the professional standard is not affected. Rather than performing any management function, the concerned person is holding only the honorary position for this entity (Jaber and Fadda 2016). The partner does not possess any decision-making powers, as she is not involving herself in any management function. Thus, it can be stated that, in the organization, the concerned person is enjoying an independent position.

Hence, according to the case study, Judith Durham is taking the honorary position of a specific Non Profit Organization, where she is not performing any decision-making activities for which she can provide her independent view while delivering her audit opinion. This is because, the term honorary position refers a particular position, where an individual occupies the space with honor, given by others, while the person is not enjoying any decision making power.

Thus, it can be proved from the above discussion that the concerned person can operate the audit procedure for the specified organization, as her independence is not going to affected further.

e) In this case, through transferring entire working papers related to an acquiring audit firm, the accountant has violated the professional and ethical standards based on APES 110.  Without taking permission from the clients regarding the documents, which he has collected at the time of engagements, the concerned person cannot reveal any information of them (Payne, Corey and Raiborn 2018). In other words, the accountant does not possess any right to supply the information to the acquiring firm of audit, related to clients before taking any permission from them regarding the related acquisition. Moreover, the client can continue with the specified acquiring firm and that time only, he can provide those documents. 

Here, Ernie Dengate needs to take permission from his clients for transferring the working paper for performing the audit procedure at the time of acquisition of the firm. He has already taken permission for transferring the working papers of taxation. However, he needs to take permission for audit documents as well. Hence, it can be concluded that the ethical requirements have breached.

f) Under this specific situation, the professional standard, based on APES 110 of section 290, states that the professional accountant needs to be independent on his views and cannot be influenced at the time of providing audit option (George, Jones and Harvey 2014). He can give taxation services along with management services and auditing services, separately. However, at the same time, the concerned person is not permitted to provide the entire related services to a particular client. Moreover, if the accountant is giving hi management services to a client, while those services are related to a decision making process of an organization, then he cannot give his audit procedure for this same entity.

According to the given case study, Fred offers both taxation and audit procedures along with management services. If the independence is affected by the provided management services when taxation and audit services are also provided, then it can be said that this action is violating the professional standards.

Hence, it can be argued that a professional accountant cannot provide all relative services to the same client, at the same time by doing so, he has breached the standard.

g) In this context, the specified accounting firm has rights to maintain the accounts of the particular organization, as the concerned firm is not providing any audit opinion related to accounts to this mentioned entity (Khovrak and Kozyarchuk 2018).  Hence, the professional standard has remained unaffected. The accounting firm is able to provide the book keeping services to this organization.

Thus, the Allgood Chartered Accounting firm is giving assistance to the Branch Company to maintain their accounting records. The concerned company has possessed inadequate computer facilities, as they have not prepared proper records. Hence, the specified accounting firm has taken the responsibility to maintain those records. Here, the firm I not giving any assurance services to this concerned company and for this, they can provide the maintenance services regarding the accounting records for the same entity. However, the chartered firm may violate the independence of the accountant, if they have provided bookkeeping services and auditing engagement to this company, at the same time.

h) Here, the professional accountant has violated the professional standard based on APES 110, which falls under section 150 (Wilson-Rogers, Morgan and Pinto 2014). The concerned professional accountant involves himself in some illegal activities and consequently violates reputation of his profession. Hence, it can be said that the concerned person has affected his profession negatively. 

In this case study, the mentioned public accountant, James Jameson, has involved himself in fight and also in the drunken mode, has assaulted an unknown person. Moreover, he has followed some disordered behavior that he has tried to drive off. Therefore, being a convicted person, the accountant has been sentenced for jail for three months while his license has also been cancelled for 1 year.

Thus, it can be concluded that the concerned accountant has violated the standard of a professional behavior and consequently, his act has remained unprofessional, which in turn has affected his profession adversely(Kuan 2015). Thus, the concerned accountant, by disrespecting his profession, has breached the professional standard.

2.a) After analyzing the given case study, it can be said that the auditor, by taking all essential steps to collect the information based on consumer position, can make a non-qualified opinion based on the issue (Tsygankova and Ponomarenko 2016). Here, information of consumer position is representing in the account, where the concerned person is unable to collect confirmation from them. Hence, the auditor can consider other procedures related to the audit for confirming the position of the consumer that is mentioned in the sample. By following the procedure, the concerned auditor has experienced satisfaction regarding the fair and true position of the accounts. Thus, it can be said that this situation is expressing a non-qualified opinion.

b) Due to lack of assistance of client for examining the position of plant, equipment and property, the auditor can state his qualified opinion on this matter. Here, the concerned accountant can experience a difficult situation to gather information regarding the true position of the accounts (Kiabel and Nwanyanwu, 2014). Hence, he can share the same issue with others, who are charged with governance. Moreover, no satisfactory reply can be obtained and he is remained unable to construct an appropriate opinion based on this same issue, where he can provide a qualified opinion. In addition to this, the plant and property comprise huge portion comprising of 35% while confirmation on those is unavailable. Hence, necessary discloser is needed to be prepared along with qualified opinion.

c) Under a specific situation, the client has refused to disclose the existence of a contingent liability, which in turn can adversely affect a client’s financial position by taking the form of actual liability. In this situation, the concerned auditor needs to form a qualified opinion (Baker 2016). Hence, it is essential for the person to discuss with the management about this matter. Here, the auditor can provide his qualified opinion on the same issue, if the management has refused to disclose in its books the contingent liability (Hass, Tarsalewska and Zhan 2016). This opinion is required as it has the capability to influence a client’s financial position while the information based on this same issue, is required to provide to its stakeholders. 

d) Here, the organization cannot record its cash sales due to inappropriate and inadequate control over internet, which in turn can influence the actual financial position of a client. Hence, based on this issue, a negative audit opinion can be made (Powell and Tilt 2017). Moreover, because of the same issue, the concerned auditor cannot operate the required audit test and this consequently can affect the situation inversely as the concerned person is unable to generate audit opinion based on true and fair position of the clients regarding the sales. Thus, the auditor can make an adverse audit option, as the person has remained unable to collect information and to find the defects that are remained constant by nature.

e) When the auditor have experienced trouble to gather sufficient information regarding the balances along with difficulties to confirm the fair ad true position related a balance sheet, it is essential for the person to generate a qualified opinion (Topor 2017). In this context, as the concerned person has not worked with the organization for the last year, it has become difficult for him to confirm the opening balances. Thus, the auditor cannot collect any information for the last year’s opening balances from the previous auditor or the management and this information should e provided by the concerned auditor in his report.

f) Through accounting standard, a client’s financial position and true position can be influenced for which, it is essential to mention the adverse opinion in his report while reporting this matter (He, Pittman, Rui and Wu 2017). It is difficult to create audit opinion based on account. The client has remained unable to construct the financial statements based on the prescribed standard. Hence, the concerned auditor can represent this matter in front of the management while due to absent of rectification, the person can form his adverse opinion.

g) As the client is refusing to follow the proper accounting principles, which is supported by the Australian accounting standard, the auditor can make a qualified opinion based on this issue (Martin?Sardesai, Irvine, Tooley and Guthrie 2017). Based on the allowed accounting principle, the client can make the valuation of inventory to reveal the true position of the inventory at the ending of the year. Due to lack of proper disclosure regarding the valuation of the inventory, the auditor cannot express his opinion. Hence, the auditor, by providing qualified opinion, can provide same report when the method has remained unchanged by the management.

h) With inappropriate concerned position of the entity in the organization along with the position of client entity, which states under financial statement that it is difficult to survive, the auditor can report the same issue in his report (Anselmi, Zarone and Brunelli 2017). The concerned person can also provide required data and causes to describe the qualified opinion. After analyzing the position of customers along with new one, it can be stated that qualified opinion is necessary. 

References:

Anselmi, L., Zarone, V. and Brunelli, S., 2017. An Evolutionary Transparency Approach to Public Accountability. Symphonya. Emerging Issues in Management, (2), pp.103-119.

Baker, L.A., 2016. Aggregate Settlements and Attorney Liability: The Evolving Landscape. Hofstra L. Rev., 45, p.33.

George, G., Jones, A. and Harvey, J., 2014. Analysis of the language used within codes of ethical conduct. Journal of Academic and Business Ethics, 8, p.1.

Hass, L.H., Tarsalewska, M. and Zhan, F., 2016. Equity incentives and corporate fraud in China. Journal of business ethics, 138(4), pp.723-742.

He, X., Pittman, J.A., Rui, O.M. and Wu, D., 2017. Do social ties between external auditors and audit committee members affect audit quality?. The Accounting Review, 92(5), pp.61-87.

Jaber, R.J. and Fadda, M.M.A., 2016. Awareness Level of Professional Independence Requirements, through Assimilation of Fundamental Principles of Professional Ethics, by Jordanian CPA Auditors, in Auditing Process: Field Study. International Journal of Economics and Finance, 8(9), p.11.

Khovrak, I. and Kozyarchuk, T., 2018. The impact of auditor’s ethics on the quality of auditing the company’s cash flows. Technology audit and production reserves, 1(4 (39)), pp.4-8.

Kiabel, B.D. and Nwanyanwu, L.A., 2014. Some basic concepts of accounting: a critical appraisal. Research journal of finance and accounting, (7), pp.197-204.

Kuan, K., 2015. Why private interest theory should be used to evaluate the adequacy of the auditor independence requirements in CLERP 9.

Martin?Sardesai, A., Irvine, H., Tooley, S. and Guthrie, J., 2017. Accounting for research: Academic responses to research performance demands in an Australian university. Australian Accounting Review, 27(3), pp.329-343.

Payne, D.M., Corey, C.M. and Raiborn, C., 2018. A MODEL CODE OF ETHICS FOR DECISION MAKING IN ACCOUNTING PROFESSIONS. 2017-2018 OFFICERS President President-Elect, p.195.

Powell, L. and Tilt, C., 2017. The examination of power and politics in a conservation organisation. Accounting, Auditing & Accountability Journal, 30(3), pp.482-509.

Topor, D.I., 2017. The Auditor’s Responsibility for Finding Errors and Fraud from Financial Situations: Case Study. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(1), pp.342-352.

Trung, N.K., 2015. Ethics Education In The University. International Journal of Scientific & Technology Research, 4(8), pp.5-10.

Tsygankova, T. and Ponomarenko, R., 2016. Key determinants of managing the marketing asset of global companies. International Economic Policy, (25), p.75.

Wilson-Rogers, N., Morgan, A. and Pinto, D., 2014. The primacy of client privilege: designing a statutory tax advice privilege for accredited non-lawyer tax advisors. Austl. Tax F., 29, p.517.