Accounting Ethics and Integrity Analysis

This assignment analyzes the importance of ethical principles in accounting, specifically the integrity principle outlined in APES 110. It discusses how professionals, such as auditors, must maintain honesty and fairness in their work to ensure good business relationships. The analysis concludes that following these principles is crucial for effective service provision and maintaining confidentiality.

Acc300 Auditing and
Assurance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question A..............................................................................................................................1
Question B..............................................................................................................................1
Question C..............................................................................................................................2
Question D..............................................................................................................................3
Question E..............................................................................................................................3
Question F..............................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Professional ethics is a vital activity which needs to be carried out particularly in
auditing. Present report deals with APES (Accounting Professional & Ethics Standards) 110
code of ethical principles which are provided by APESB of Australia. There are five principles
which are imparted in the report and reasons for the same are provided. Various sections of
APES 110 are enumerated with the scenarios. Moreover, violations if any in different scenarios
are analysed and reasons are given as well. Hence, ethics shall be abided by the professionals in
conducting audit.
MAIN BODY
Question A
Section 150 Professional behaviour
The auditing and assurance is a vital task to be performed in company by professionals
who provide services to clients. APESB (Accounting Professional & Ethics Standards Board) of
Australia guides members imparting financial services to businesses and guidance related to
ethical accounting practices are provided. APES 110 eases off difficulties to professionals as
they follow guidelines and decrease threats accordingly by increasing value of services. In this
scenario, Peter Sung is the senior auditor of company and Dave Thompson, the CFO asks if Peter
Sung wants tickets of concerts at a 25% discount. Ethical principle under Section 150
Professional behaviour has been identified and violated. This is violated because auditor must act
according to the professional behaviour. He cannot avail any belongings from company.
Main impact of such violation is that it may discredit his profession. It is an obligation of
auditor that laws and regulations should be met and no action should be done which might affect
its profession up to a certain extent. Good reputation of Peter Sung, Senior Auditor of Musical
Company Pty Ltd may be affected. This could have impact on the future as honesty gets affected.
Hence, it is required that APES 110 ethical principles must be followed and no violations shall
be made which may harm conceptual framework of standard. Moreover, members should engage
in providing auditing services only and stick to policies and report any fraudulent element
affecting truthfulness of financial statements (Trevino and Nelson, 2016).
Question B
Section 130 Professional competence and due care
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The ethical principles are to be followed by member so that no violations will be made in
accordance with APES 110. It can be analysed from the scenario that Jana Went is appointed as
an auditor of Gerroa Company for imparting diligent services and assessing fairness of financial
statements. Jana has been working in auditing industry for last three years but performing audit
for Gerroa Company for the first time. It is essentially required that Jana Went performs her duty
in the best possible manner. It can be noted that no violation has been analysed because client
has been appointed for first time for attaining services and Jana would provide the same as she
has experience of last three years. Potential influence in the future will be on Jana Went because
she has been appointed as an auditor of company.
Professional services with due diligence should be provided to client and to effectively
ensure that competent services are given. Necessary skills required in performing work should be
exercised and sound judgement must be applied (APES 110 Code of Ethics for Professional
Accountants, 2010). Diligence must be exercised as Jana Went has the responsibility to carefully
provide facilities. If auditor violates such ethical principles, then it may incur bad consequences
in the future. Appropriate training is needed and supervision is essential for providing better
services quite effectually. It is required that auditor should provide better services to client in
order to achieve satisfaction and to comply with ethical framework. Hence, professional
competencies should be exercised by Jana Went and due care is to be taken regarding analysing
financial statements.
Question C
Section 130 Professional competence and due care
Due diligence should be carried out by the auditor. It can be analysed that there are two
parties in the case study. One is the client himself requesting assistance of Jack Dack, a chartered
accountant in installation of computerised inventory system. However, Jack says that he has no
experience particularly in handling such system and he engages consultant which has some
knowledge regarding inventory system. Furthermore, due to technical work, Dack is not able to
review the work of consultant and agrees to proposal and gives clearance for installation of
system. Party potentially influenced in the future will be Dack as on his acceptance. Client has
approved rather he has not focused on work of his consultant.
The violation of professional competencies and due care has been analysed because it can
be outlined that Dack is not able to analyse consultant's work and without the same, he gives
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approval for computerised inventory system to be installed. Moreover, he should have exercised
due diligence and skills before approving project (Mladenovic, Martinov-Bennie and Bell, 2017).
Client should be given with competent advices and services. Further, it is the duty to act
diligently according to technical standards when imparting facilities in a better way. Moreover,
Dack should have provided and made aware of limitations if any in services so that wrong
decision-making could be ignored. Hence, it is required that professional behaviour must be
followed by the auditor.
Question D
Section 120 Objectivity
The ethical principle of objectivity states that their professional behaviour must override
conflict of interests or reduction of biasness. In simple words, it imposes due obligation on
members in not compromising their sound judgement if any bias or conflict of interests takes
place or may be undue influences made by others are affecting ethics. This is essentially required
because proper and effective auditing services need to be provided and if negative influences
come in path of audit, then diligence is highly devastated. It can be referred to case study that
four chartered accounting firms have taken part in quality assurance working paper review
program. In this, each organisation reviews working papers of other firms and discussion is made
by reviewer regarding strengths and weaknesses of audit with other organisation auditor (Caratti
and et.al., 2018).
Violation of objectivity can be analysed because reviewer analyses strengths and
weaknesses of audit done by auditor of particular firm. It means that undue influences are made
by reviewer affecting and impairing objectivity. The impact could be severe in the future as
professional services cannot be imparted with such influences. Moreover, it is needed that
quality assurance program should not exercise strengths and weaknesses on the basis of audit.
This is because; it violates relationship biases and thus, better judgement cannot be provided.
Auditor's professional judgement in relation to service gets affected. Thus, ethical code of
conduct should be followed.
Question E
Section 130 Professional competence and due care
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Firm is required to provide professional competencies in carrying out operations in an
effective manner. The auditing firm is required to carry out better services to client so that
satisfaction may get enhanced. In the case study, it can be identified that Johan Geldens runs
insurance agency and complements his auditing, tax and superannuation services. However, he
has appointed Janine Borg who reviews adequacy of client's insurance with management if it
seems to be under-insured. It is required that auditor will analyse whether adequacy of client
regarding insurance standing should effectively carry out that whether it is fair or not. If position
of client is under-insured then, he reverts back to insurance agency and Johan Geldens who is
running the same.
The principle of professional competence and due care is violated because Johan Geldens
does not use his own name and on the behalf of manager, decisions are made. In this scenario,
reason for violation is that insurance agency has not carried out due diligence because name is
not provided. Moreover, the impact on future could be that firm may held liable for not
disclosing the name by law. It may have to face legal consequences.
Question F
Section 110 Integrity
Ethical principles are required to be abided by professionals so that business relationships
can be maintained in a better way. It can be analysed that Edith Bailey, a public accountant runs
partnership firm providing variety of services such as tax related, management advisory,
bookkeeping and audit, etc. Since, town is small and two partners are there in firm and only two
accounting organisations prevails thus, same person carries out duty in last ten years. It can be
interpreted from the case study that no violation as such is attained as same person can perform
audit. Moreover, it can be identified that professionalism should be exercised in a better way.
Integrity principle imposes due obligation that members should be honest and
straightforward in a professional relationships (Chaplin, 2017). Fair dealing with financials shall
be made. It is required that violations are made when integrity is ruined in which auditor must
not knowingly state that reports or financials contain materially false information. Statements are
furnished recklessly without due care and auditor knows it, but do not disclose the same.
However, if he becomes aware of disassociated information, then reasonable steps should be
taken and integrity should be maintained. Furthermore, integrity could have serious impact in the
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future if firms will be opened and operated. Then, the need for more straightforward behaviour
will be arrived.
CONCLUSION
Hereby, it can be concluded that ethical principles provided by APESB such as APES
110 are important to effectively be followed by professionals so that better services should be
provided by them. Furthermore, information should not be disclosed to other parties and
confidentiality as well as integrity shall be maintained.
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REFERENCES
Books and Journals
Caratti, S. and et.al., 2018. An analysis of the Tax Practitioners Board outsourcing exposure
draft. Tax Specialist. 21(3). p.106.
Chaplin, S., 2017. Accounting Education and the Prerequisite Skills of Accounting Graduates:
Are Accounting Firms’ Moving the Boundaries?. Australian Accounting Review. 27(1).
pp.61-70.
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.
Mladenovic, R., Martinov-Bennie, N. and Bell, A., 2017. Business students’ insights into their
development of ethical decision-making. Journal of Business Ethics, pp.1-13.
Trevino, L. K. and Nelson, K. A., 2016. Managing business ethics: Straight talk about how to do
it right. John Wiley & Sons.
Online
APES 110 Code of Ethics for Professional Accountants. 2010 [PDF]. Available through:
<https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf>.
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