Auditing Theory and Practice for Ethical Standards- myassignmenthelp

Question: Discuss about the Auditing Theory and Practice for Ethical Standards. Answer: APES 110 on code of ethics for the professional accountants had been released by APESB (Accounting Professional Ethical Standard Board and the code is effective from 1st July 2011. As per the code, the fundamental principles under professional ethics for the members and it offers conceptual framework for the members that is applied to Identifying the threats for complying with the fundamental principles Estimating consequences of the threats identified Applying the safeguards for eliminating threats or reducing tem to the level that is acceptable. However, the members shall apply the professional judgement while applying the above mentioned conceptual framework (Accounting Professional Ethical Standards Board 2018). Audit working papers that is the documents that records all the audit evidences obtained while auditing the financial statements, auditing of information systems, auditing of internal management and investigation (Accounting Professional and Ethical Standards Board (APESB) 2013). However, the auditing papers solely belong to the auditors and with his own discretion he can make available part of the working papers to the outsiders. Further, for disclosing the working papers to any third party prior permission of the client must be obtained. Moreover, the auditor must comply with general law duty with regard to the confidentiality of the client. As per the given circumstance, Penshurst Accountants was not advised to carry out the peer review by Mortdale Accounting and the peer review is carried on its own discretion. Further, the prior permission from the client has not been taken before providing the working papers to third party. Therefore it violated the ethics as per APES 110. If the employer considers a person to engage into his firm or organization before engaging he must made some routine enquiry regarding the potential candidate. The inquiry may include the matters like his behaviour, work experience, integrity, objectivity and professional approach. Further, ha may contact the previous employer of the applicant to enquire as to whether any professional or any other reasons are there that the appointment shall not be made (Krupenye et al. 2018). Therefore, if the employer employs the person without contacting the current employer or any other person on request of the applicant it will violate the professional approach and breach the ethics of APES 110. The member from the public practices are not allowed to advertise their work through any means like personal call, online marketing as it violate the ethical principle of APES 110. Under given circumstances, Wendal Sailor, the chartered accountant, during audit used to call frequently in the client office to take up services for his superannuation and insurance business (Accounting Professional Ethical Standards Board 2018). Further, they did so before delivering the final opinion regarding audit. Under such circumstances, the self interest threat is created as the auditor suggested availing their services through inconsistent way. Therefore, it is the violation of ethics under APES 110. A member under public practice must determine while offering professional service whether any threats are there with regard to the compliance of fundamental principle associated with objectivity (George, Jones and Harvey 2014). The issues may be created if the member has any relationship or is interested in the client or its employees, directors or officers. Under given circumstance, Judith Durham, the audit partner is also the member of board of directors of the client organization. Therefore, Ms Durham is included in the audit team for carrying out the audit of the charitable organization it will breach the ethical principle of APES 110. The fact that the position is honorary will not alter the conclusion of the case. The member must maintain the confidentiality for the information that is disclosed by the prospective employer or client. Further, he must take the necessary steps for ensuring the confidentiality of the clients data or information. Moreover, the confidentiality must be maintained even after closing the relationship with the client (Naslmosavi, Sofian and Saat 2013). However, the information can be disclosed to third party if the disclosure is granted by law and prior authorisation has been taken from the client. As per the given situation, the member while selling his practice released the tax working papers along with the other working papers related to auditing and bookkeeping. However, the permission was taken from the client only for the tax working papers. Hence, it will violate the ethics stated under APES 110. If the member offers non-audit services along with the audit services it will create self-interest threat and its significance will not be reduced though any safeguards. As per the given situation, Mr Fred Nerk along with the audit service also provides various services like management advisory services and tax services for same client. Providing these services in addition to audit will be considered as non-audit services and will attract self-interest threat. Hence, it will breach the ethics mentioned in APES 110 (Accounting Professional Ethical Standards Board 2018). As per APES 110 the auditors are not supposed to assist in preparing the financial statement of the client and they shall refrain themselves from providing any opinion in the financial matters. However, the audit working papers obtained by the auditor during the audit and any accounting records of the client company can be kept in safe place to ensure its availability and safety. To maintain the records safety and protect it from being lost the auditor maintain it in their own computer if the wish to. Therefore, if All Good Chartered Accounting firm maintains client data in their own computer it shall not breach the ethical principle mentioned in APES 110. As per Section 150 of APES 110 professional behaviour, the members shall comply with the applicable regulations and laws and must avoid the action that may discredit his profession. These actions include the omission or action involving third party who may conclude the adverse impact on the professionals good reputation(Accounting Professional Ethical Standards Board 2018). Violation of professional behaviours also includes involving in fight, assault or taking excessive drink. In the given circumstances, the public accountant Mr James Jameson while attending Christmas party consumed excessive drugs and alcohol. Eventually he got involved in a fight with a person and charge if assault brought against him. Owing to this incident Mr Jameson convicted and eventually sentenced to three months and his license also suspended for the period of 1 year. Therefore, behaviour of Mr James Jameson in the given case breached the ethical principle of APES 110. Audit opinions are expressed on the audited financial statements. The requirement of expressing the opinion is to ensure that the generally accepted accounting principles are followed by the company while the financial statements were prepared (Cox 2013). In general 4 types of audit opinion are provided by the auditors after completing the audit of any client. These are Unqualified opinion when there is no reservations regarding the financial statements a clean or unqualified opinion may be provided. It states that the report is presented in fair manner. Qualified opinion it states that the auditors have taken the exception to certain accounting principles related to current period or is not able to establish potential outcome of material uncertainty Disclaimer of opinion this reports does not provide any type of opinion regarding the condition and financial position of the company Adverse opinion it indicates that the financial statement of the company is misstated, misrepresented or is not presented accurately. Though the auditor was able to satisfy him regarding the account balances through other procedures, he was not able to get confirmation from 8 major clients. Hence, in this situation a qualified opinion will be issued. The equipment, plant and property of the company that comprises of 35% of entire assets could not be verified due to restriction from the client. Therefore, in such circumstances, a disclaimer of opinion will be issued. The client must disclose through notes the contingent liabilities that may have material impact if materialises. Not disclosing the fact will raise question of true and fairness of the report. Hence the qualified report shall be issued here. If the auditor cannot verify transactions including significant amount owing to inadequate internal control system qualified opinion shall be issued. Further, no audit tests were available fir assuring that the recorded amounts are correct. Therefore, qualified opinion shall be issued (de Andrs Surez et al. 2013). If the auditor is pleased that no material misstatement is involved in the financial statement, he can issue the unqualified report. Further, the opening balance can be confirmed from the previous years closing balance. After the Australian accounting standards came into force every Australian company shall follow the standards while preparing their financial statements. Therefore, the adverse opinion shall be issued as the company is not prepared their financial statement as per AAS (Aasb.gov.au 2017). As the LIFO system of maintaining inventory is disallowed by AAS, the company shall not follow the system. Therefore, the auditor here will issue qualified opinion. As major client of the company has been liquidated and it is unlikely that other customers will occupy their places, the going concern status of the company is in doubt. If the company does not disclose the fact in their financial statement, disclaimer of opinion shall be issued (Amin, Krishnan and Yang 2014). 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