APES 110 Code of Ethics for Professional Accountants

This article discusses the APES 110 Code of Ethics for Professional Accountants and its application in three different situations. It examines the ethics violation in each situation and provides a solution. The article also includes a bibliography for further reading. The subject is accounting and the course code is APES 110. The content is relevant for students studying accounting and ethics in college or university.

APES 110 Code of Ethics for
Professional Accountants

Table of Contents
Solution to Situation “1”:.............................................................................................................................3
Situation:.................................................................................................................................................3
Examination of ethics violation as per APES 110:....................................................................................3
Solution to Situation “2”:.............................................................................................................................3
Situation:.................................................................................................................................................3
Examination of ethics violation as per APES 110:....................................................................................3
Solution to Situation “3”:.............................................................................................................................4
Examination of ethics violation as per APES 110:....................................................................................4
Bibliography................................................................................................................................................5

Solution to Situation “1”:
Situation:
Four chartered accounting firms have been taking part in a quality assurance working paper review
program. Under this review, each firm reviews the working papers of another firm and the reviewer
discusses the strengths and weaknesses of the audit with the auditor from the other firm.
Examination of ethics violation as per APES 110:
The case mentioned above is violating the Section 140 of APES 110 relating to Confidentiality as
discussed below:
As per Section 140.1 (a) and (b) of APES 110, the members of the engagement team should not disclose
external to the firm confidential information which has been obtained as a result of business of
professional relationship unless the same is required by any law in force. (APESB, 2010)
As per Section 140.4 of APES 110, the member shall maintain confidentiality of information obtained
during the course of business within the firm or employing organization too. (ICAEW, 2018)
In the above case, the reviewer is violating the section as he is discussing the strength and weakness of
the audit with the auditor of the other firm and is violating the confidentiality by passing information to
external parties.
Solution to Situation “2”:
Situation:
Johan Geldens, a chartered accountant, also runs an insurance agency, which complements his auditing,
tax and superannuation services. He does not use his own name on anything relating to insurance
agency and has a highly competent manager, Janine Borg, who runs it. Geldens often requests that Borg
review the adequacy of the client’s insurance with management if the client seems underinsured.
Examination of ethics violation as per APES 110:
As per Section 290.175 of APES 110, a self-review threat is subsumed when a member or a firm
performs a valuation for a client, which comprises making assumption with respect to future values and
the same is incorporated in financial statement of an audit client. (APESB, 2010)
As per Section 290.176 and 177 of APES 110, the threat that is created above can be minimized or
safeguarded by engaging a professional expert who has not been part of the assurance team, to review
the valuation work done, taking the client’s acknowledgement of the responsibility for the valuation
done by them and assuring that the expert involved in valuation doesn’t form part of the team in the
review for the same client. (Long, 2013)

In view of the above case, it can be concluded that Johan Geldens has complied with the standard by
ensuring that Janine Borg who is reviewing the adequacy of insurance is not forming part of the team
that performs review audit, and ensures that the same is reviewed independently and owned by client
too.
Solution to Situation “3”:
Edith Bailey , a public accountant in a small country town, runs a small partnership accounting firm
which provides tax services, management advisory services ,bookkeeping services and conducts audits
for the same client .Since the firm has only two partners and there are only two accounting firms in this
town frequently the same person carries out these services over the last ten years.
Examination of ethics violation as per APES 110:
As per Section 290.167 of APES 110, management is responsible for the preparation and fair
presentation of the financial statement in accordance with the applicable financial reporting and
preparation framework. (APESB, 2010)
As per Section 290.168 of APES 110, a member who provides the audit client with accounting and book
keeping service and reviews the same creates a self-review threat when he subsequently reviews the
same and violates the ethics code. (Tsai, 2015)
As per Section 290.174 of APES 110, a member can provide both accounting and bookkeeping service to
client in any urgent or exceptional situation where it is not practical for client to make any arrangement
but has to ensure that adequate precaution and safeguards are taken so that those who have provided
the services of book keeping are not part of the team that reviews the client, the services provided are
only for a short period of time and it has been discussed with management in governance.
From the above case, it can be concluded that Edith Bailey has not complied with the standard since the
same person has provided all the services, which is violation of Section 290 as discussed above.
Bibliography

APESB, 2010. APES 110 Code of Ethics for Professional Accountants. [Online]
Available at: https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf
[Accessed 12 September 2018].
ICAEW, 2018. Code of Ethics A. [Online]
Available at: https://www.icaew.com/membership/regulations-standards-and-guidance/ethics/code-of-
ethics-a
[Accessed 12 Sep 2018].
Long, S., 2013. AUDITOR INDEPENDENCE. AUDITOR INDEPENDENCE, p. 12.
Tsai, F., 2015. Auditors must not prepare financial statements. [Online]
Available at: https://businessmirror.com.ph/auditors-must-not-prepare-financial-statements/
[Accessed 12 Sep 2018].