ACC300 Group Assignment: APES 110 Code of Ethics for Accountants

This assignment provides a detailed analysis of several situations involving potential violations of the general ethical principles outlined in APES 110 Code of Ethics for Professional Accountants. It examines scenarios related to auditor independence, acceptance of gifts, professional competence, confidentiality, and provision of multiple services to the same client. Each situation is analyzed with reference to specific sections of APES 110, such as Sections 290.6, 290.126, 260.1, 260.2, 260.3, 130.1, 130.5, 130.6, 140.1(a), 140.3, 140.4, 140.6, 290.175, 290.177, 290.167, 290.168, 290.171, and 290.174, to determine whether ethical violations have occurred and explains the reasoning behind each conclusion, offering a comprehensive understanding of ethical considerations in professional accounting practices.

APES 110 Code of Ethics for
Professional Accountants

TABLE OF CONTENTS
Abstract.......................................................................................................................................................4
Introduction.................................................................................................................................................5
Solution to Situation “a”:.............................................................................................................................6
Situation:.................................................................................................................................................6
Analysis of Ethical principle as per APES 110:..........................................................................................6
 APES Section 290.6......................................................................................................................6
 APES Section 290.126..................................................................................................................6
Solution to Situation “b”:.............................................................................................................................6
Situation:.................................................................................................................................................6
Analysis of Ethical principle as per APES 110:..........................................................................................6
 APES Section 260.1......................................................................................................................6
 APES Section 260.2......................................................................................................................6
 APES Section 260.3......................................................................................................................7
Solution to Situation “c”:.............................................................................................................................7
Situation:.................................................................................................................................................7
Analysis of Ethical principle as per APES 110:..........................................................................................7
 APES Section 130.1......................................................................................................................7
 APES Section 130.5......................................................................................................................7
 APES Section 130.6......................................................................................................................7
Solution to Situation “d”:.............................................................................................................................8
Situation:.................................................................................................................................................8
Analysis of Ethical principle as per APES 110:..........................................................................................8
 APES Section 140.1(a)..................................................................................................................8
 APES Section 140.3......................................................................................................................8
 APES Section 140.4......................................................................................................................8
 APES Section 140.6......................................................................................................................8
Solution to Situation “e”:.............................................................................................................................8
Situation:.................................................................................................................................................8
Analysis of Ethical principle as per APES 110:..........................................................................................8

 APES Section 290.175..................................................................................................................8
 APES Section 290.177..................................................................................................................8
Solution to Situation “f”:.............................................................................................................................9
Situation:.................................................................................................................................................9
Analysis of Ethical principle as per APES 110:..........................................................................................9
 APES Section 290.167..................................................................................................................9
 APES Section 290.168..................................................................................................................9
 APES Section 290.171..................................................................................................................9
 APES Section 290.174..................................................................................................................9
References:..................................................................................................................................................9

Abstract
Auditing can be said, in simple words, the expression of opinion on financial reports based on
various regulations, rules, standards and act. Auditors have to be cautious so as to maintain
high degree of professional standards and to avoid any disciplinary actions which can be
bestowed on them by the regulatory and authoritative bodies governing them. Proper
professional care by following the guidelines issued by regulatory authorities can reduce their
threat and increase the credibility of the auditing work.

Introduction
The service of auditing is the examination of the financial report of the organization and to express an
opinion on the same. In order to freely express an independent opinion, the auditors have to be
independent, influence free, maintain integrity, fully skilled, maintain professional competency and
comply with the various standards and regulations binding them. The Auditors need to keep themselves
abreast from any personal benefits or gains and maintain high quality standards in expressing opinion.
The analysis of below six situations is a good platform for analysis of real life situation which can impair
the independency of the audit opinion expressed.

Solution to Situation “a”:
Situation:
Jenny Wang is the Senior Auditor on the audit of Panania Cars Pty Ltd , a large car dealership, a which
sells new and used cars .The Sales Manager advises Jenny Wang that there is a sale to long established
customers of the car dealership and since she has audited the company for the past six years she can
purchase the new cars at a twenty percent discount on the discounted sales price.
Analysis of Ethical principle as per APES 110:
The situation of Jenny Wang fully complies with the Independence of the audit teams and members of
the engagement.
 APES Section 290.6 states that the auditor must have independence of mind and appearance
while conducting the engagement.
 APES Section 290.126 states that the procurement of goods and services from an Audit client
by the member of the audit team or audit firm or of that’s immediate family member doesn’t
create a threat to independence if the transaction is in normal course of business and at arm’s
length price
In the above case, Jenny Wang has purchased the new cars when the Company was running a discount
for long established customers and the same was also passed on to Jenny and hence the transaction was
at arm’s length price.
Solution to Situation “b”:
Situation:
Katrina Wearne is the auditor on the audit of Lancom Cosmetics .Katrina is auditing the company during
November and December 2018 and has been given a Christmas gift of $350 cosmetics from the
company.
Analysis of Ethical principle as per APES 110:
Members in Public practices can be offered various gifts to influence them which pose threats to the
independency on expressing opinion fairly. Section 260 Gifts and Hospitality describes all such
situations in details.
 APES Section 260.1 states that accepting gift from clients results in self interest threats, threat
to compliance with the basic principles, familiarity and intimidation
 APES Section 260.2 states that the existence and the extent of the threat will depend on the
type, value and intention of the offer. Where gifts or hospitality offered are of significant nature,
value, then it’s out of acceptable level and auditors are breaching the standards

 APES Section 260.3 states that the audit team shall evaluate the significance of these threat
and apply safeguards to reduce the same to an acceptable level
In the above situation, the gift offered was in the normal course of business since Katrina was auditing
the Company during November and December which happens to be Christmas time and was offered the
gift whose nature and value as well as intent was not to influence the decision making and hence is not
in violation of APES 110.
Solution to Situation “c”:
Situation:
A client requests the assistance of D.Marron, a chartered accountant ,in the installation of a computer
system for maintaining production and inventory records .As Marron has no experience in this type of
work he engages a computer consultant who he has confidence in to carry out the review. Due to the
highly technical nature of the work Marron is not able to review the computer consultant’s work and
once the client has agreed Marron gives the go ahead for the installation of the computer system.
Analysis of Ethical principle as per APES 110:
The fundamental principle of professional competency and due care requires any member to only
undertake significant task for which the Member has, or can obtain, sufficient specific training or
experience. Section 130 Professional Competence and Due Care describes in details the circumstance in
details.
 APES Section 130.1 states that the principle of professional competence and due care
imposes on all the members to maintain professional knowledge and skills at the level required
to ensure that the client receives competent services and has also to act diligently in accordance
with the applicable technical and professional standards when providing professional services
 APES Section 130.5 requires that a member to take reasonable steps to ensure that those
working under its authority in a professional capacity have appropriate training and supervision
 APES Section 130.6 requires that a member shall make clients, employers or other users of
the member’s professional services aware of the limitation inherent in the service
In the above situation, D.Marron has ensured that the computer consultant working under its authority
has appropriate training and supervision to conclude the services for him but failed to appraise the
client of the limitation inherent in the activity because of his lack of knowledge in computer work since
the same was highly technical in nature and based on client acceptance Marron gives go ahead for
installation of computer system and hence has not asserted professional competence and due care
while imparting services to the client.

Solution to Situation “d”:
Situation:
Six small 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.
Analysis of Ethical principle as per APES 110:
The stated situation is in breach of Section 140 Confidentiality which deals with confidentiality of the
audit teams and members of engagement.
 APES Section 140.1(a) states that members of the engagement team cannot disclose any
information obtained from working in audited organization as a result of their professional and
business relationship unless required by law or with proper permission from the required
authority.
 APES Section 140.3 states that a member will keep safe the information and maintain
confidentiality of the information disclosed to him during his professional duties independently
and properly
 APES Section 140.4 states that a member shall maintain full confidentiality of information
within the firm
 APES Section 140.6 states that a member needs to comply with the principle of confidentiality
even after the end of relationship with the client
In the above situation, the reviewer is discussing the strength and weakness of the audit with the
auditor of the other firm and is breaching the confidentiality by passing information to other parties.
Solution to Situation “e”:
Situation:
Bill Holland, a chartered accountant, sets up a casualty and fire insurance agency to complement
his auditing and tax services .He doesn’t use his own name on anything relating to insurance agency
and has a highly competent manager, Simone Taylor, who runs it .Holland often requests that Taylor
review the adequacy of the client’s insurance with management if the client seems underinsured.
Analysis of Ethical principle as per APES 110:
 APES Section 290.175 states that a self review threat can be created when a firm performs a
valuation for the client that is to be incorporated into the client’s financial statement
 APES Section 290.177 states that the threat as created above can be reduced or safeguarded
by involving an additional professional accountant who was not member of the assurance team
to review the work done, confirming with the client the understanding of the underlying
assumption of the valuation and the methodology to be used, obtaining the audit client

acknowledgement of responsibility of the work done and making arrangement so that the
person involved in valuation doesn’t take part in review
In view of the above, section it is seen that Bill Holland has complied with APES 110 by ensuring that
Taylor who reviews the client adequacy of insurance is out of the team that performs audit as well the
same is reviewed and ultimately owned by client too as taylor reviews the same with management and
not with Holland.
Solution to Situation “f”:
Situation:
Emma Lawrence, a public accountant in a small country town, provides tax services, management
advisory services ,bookkeeping services and conducts audits for the same client .Since the firm is small
the same person often carries out all the services.
Analysis of Ethical principle as per APES 110:
 APES Section 290.167 states the management is responsible for preparation and fair
presentation of Financial statement in accordance with the applicable financial reporting
framework
 APES Section 290.168 states a member who provides the audit client with accounting and
book keeping services, creates a self review threat when the firm subsequently audits the
financial statement
 APES Section 290.171 states that the firm may provide services related to the preparation of
accounting records and Financial statement to an Audit client where the services are not of
routine nature or mechanical nature, in all such cases threat needs to be evaluated and
safeguards taken to eliminate or minimize threats
 APES Section 290.174 states that both accounting and book keeping services may be
provided to client in urgency or other unusual situation where it is impractical for client to make
other arrangement. In all such situation those who provide the services should not be member
of the audit team, the services are provided for a shorter period of time and are not expected to
recur and it has been discussed with those charged with governance
From the above, it can be concluded that Emma Lawrence has not complied with the APES 110 since the
same person carries out all the services which is in non compliance of Section 290 as discussed above.
References:
An Overview of APES 110 Code of Ethics for Professional Accountant,
(https://www.cpaaustralia.com.au/professional-resources/accounting-professional-and-ethical-
standards/apes-110-code-of-ethics-for-professional-accountants)