Answer to Question [a]
The provided case study states that Berowra Accountants are assuring that there will be guaranteed tax refund for the business of their clients and the company is stating this with the help of a special advertisement. Tax refund is the difference between tax owed and tax paid and it is completely related to taxation. Companies can avail the opportunity of tax refund in case they pay more amount of tax than their tax liabilities (Galit and Sorbe, Metabank 2012). Income of the organization, profit and tax expenses are the main determinants of tax refund for the companies and thus, an auditors cannot assure a company for tax refund. It is the responsibility of the auditors to inspect the company’s financial statements for finding material misstatements and to make the compliance check. To provide these types of assurance shows lack of professionalism of the auditors. Thus, according to APES 110 Code of Ethics for Professional Accountants, Section 130, by providing this type of advertisement, Berowra Accountants has violated the ethical principle of Professional Competence and Due care (Han Fan, Woodbine and Cheng 2013).
Answer to Question [b]
The provided case study indicates that Jamie Harvey is the auditor is an auditor of a chartered accountant firm and he has been requested to hold the position of the treasurer of a local athletic club. Information shows that Jamie Harvey conducts the audit of large public firms. The nature of athletic clubs is not-for-profit societies. APES 110 Professional Appointment, Section 210 states that it is the duty of the auditors to determine the fact that where their new appointment as auditor has negative impact on the fundamental ethical principles of auditing (Wijesinghe 2015). For this particular situation, Jamie Harvey will not violate any fundamental ethical principle of auditing by accepting the offer to be the treasurer of the local athletic club as Jamie Harvey only conducts the audit operation of large public companies and to be the treasurer of the local athletic club does not pose any threat to his auditing works. Moreover, there is not any breach of any fundamental auditing principles due to the appointment in any not-for-profit organization. All these aspects make Jamie Harvey safe from violating any auditing ethical principle.
Answer to Question [c]
According to the provided situation, the payment of the auditor, Pymble Accountants largely depends on the suitable audit opinion Monlec Ltd, the audit client. This situation indicated towards the demand of the audit client to get favorable audit report from the auditor. However, it is not the duty of the auditor to provide favorable audit opinion as they are the representatives of shareholders, investors and creditors. APES 110 Principle of Objectivity, Section 120 indicates that under any kind of influence, conflict of interest, biasness or other, the auditors must not compromise their professional audit judgment (Marley and Pedersen 2015). It perfectly indicates that the auditors should not be affected with any kind of undue influence from the audit client. In this particular situation, the auditor will violate the auditing ethical principle of objectivity in case they issues favorable audit opinion for Monlec Ltd. On the contrary, in case the auditor does not come under the pressure of Monlec Ltd and issues fair audit opinion, there will not be any violation of audit principles.
Answer to Question [d]
From the provided case study, it can be observed that Chadwick Chartered Accountants receives all the papers and reports related to audit of Motoring Services from Winton Accountants. It is the responsibility of Chadwick Chartered Accountants to review the quality of audit of Winton Accountants. As a part of this job, it is required for Chadwick Chartered Accountants to conduct a number of analytical processes and tests for checking the audit quality of the financial statements Winton Accountants. According to APES 110 Principles of Confidentiality, Section 140, it is the professional obligation of the auditors to maintain the confidentiality of data and information of the audit client acquired at the time of conducting the audit operations (Blackburn, Carey and Tanewski 2014). As a result of this auditing principle, the auditors do not have the right to disclose the auditing information to any third party. The opposite of this instruction can be observed in this case as Winton Accountants have delivered all audit papers and reports to Chadwick Chartered Accountants that contain confidential financial information of the audit client. Thus, it is clear that this particular action of Winton Accountants has violated the confidentiality principle of audit ethics.
Blackburn, R., Carey, P. and Tanewski, G., 2014. Business advice by accountants to SMEs: relationship and trust.
Galit, S.H. and Sorbe, T., Metabank, 2012. Computerized extension of credit to existing demand deposit accounts, prepaid cards and lines of credit based on expected tax refund proceeds, associated systems and computer program products. U.S. Patent 8,090,649.
Han Fan, Y., Woodbine, G. and Cheng, W., 2013. A study of Australian and Chinese accountants’ attitudes towards independence issues and the impact on ethical judgements. Asian Review of Accounting, 21(3), pp.205-222.
Marley, S. and Pedersen, J., 2015. Accounting for Business: An Introduction. Pearson Higher Education AU.
Wijesinghe, M.C., 2015. Technical Update 2013/2.
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