APES 110: Code of Ethics for Accounting Professionals

This article discusses the APES 110 code of ethics for accounting professionals and its application in various auditing scenarios. It covers the rules and regulations related to acceptance of gifts and hospitality, confidentiality, independence, and objectivity. The article provides detailed analysis of six different auditing cases and how the code of ethics applies to them. The cases cover topics such as self-interest threat, valuation of inventory, and acceptance of gifts. The article emphasizes the importance of integrity and objectivity in financial reporting.

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AUDITING & ASSURANCE

APES 110
Answer – 1
APES 110 can be said to be the code of ethics that has been prescribed by the Accounting
professional and ethical standard board. It is an independent body that is initiated by the CPA
Australia and the Institute of Chartered Accountants of Australia. The principles are
applicable to the ones present in Australia.
a. Jenny Wang case
Jenny Wang has been the auditor for panania Cars Pty Limited for the past 6 years and now
she is given the opportunity to buy the new cars at a discount of 20% on the discounted sale
price.
Section 260 of APS 110 States certain rules and regulations about the acceptance of gifts and
Hospitality. This section includes that if a member of any family participant of this member
accepts gifts from the company when it is likely to have a self-interest threat. The value and
the nature of the offer made by the company to the member are considered to be important. In
the given case, the 20% discounts have created the self-interest threat. Later if the auditor is
approached by the company for any kind of unreasonable request in reference to the auditor
financials then the auditor might not be able to refuse (Fazal, 2013). In any case, if we find
that the threat cannot be a lesson or cannot be removed completely or to an acceptable level
then the auditor should decline to accept the offer because it will have a negative influence
and it will hurt the independence of the judgment of the auditor. The growing familiarity of
the auditor with the company hinders Independence of the auditor.
b. Katrina Wearne me case:
Katrina Wearne is appointed for the auditing of Lancôme cosmetics. The auditor is offered a
gift of $350 worth cosmetics from the company. Section 260 of the code States certain rules
and regulations about acceptance of gifts and Hospitality. It is stated in the code that if the
auditor accepts any kind of gifts from his client then there creates a self-interest threat. The
extent and the importance of the threat are decided based on the value of the offer or
hospitality served (Hoffelder, 2012).
According to the code, an auditor is prohibited from receiving any kind of gifts whether in
cash or in kind from the target company as it may create self-interest rate and hurt the
independence of the auditor (Gay & Simnet, 2015). Of course, the familiarity of the client
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APES 110
with the company affect the Independence and decision-making process carried out by the
auditor. There are no limits all values that are being set up by the code about the offers or the
gifts that can be accepted or not. In any case, the auditor is not allowed to take any type of
gifts whether small or big from the target companies (Kaplan, 2011). So it is advisable that
Katrina should refuse to accept the gift because such acceptance of gift would have any
material impact in the future.
c. D.Marron case
D. marron is a chartered accountant and he has indicated the computer consultant in order to
install a computer system so that he can maintain proper records of production and inventory.
He does not specialize in this and therefore cannot review the work going on. However and
the auditor is defined as a person who has specialized kids in the required fields apart from
accounting and auditing.
The fundamental principle of the code states that a person should be highly competent and
should perform his obligations with you care which means that an auditor should have an
adequate knowledge and should upgrade skills in order to provide his clients proper services
in accordance with the standards. In the provided case D marron as been given the duty to
review the work that is being done by the consultant. D. Marron should have reviewed the
work by an external expert which he has not performed and hence has violated the code.
d. small Chartered Accountant firms case
The conceptual Framework requirement states that confidentiality is required according to the
fundamental principles. This principle also states that the information that has been collected
by the auditing of the firm’s account should not be provided or discuss with any outsider or
third party. This can be carried out if there is a legal and professional duty which has been
made in accordance with the situation. In this particular case, the papers of the organization
are being reviewed by another organizations member which is the complete violation of the
principle. It is not compulsory to take this into fact. It should also be noted that the working
papers are not public documents and hence the auditing firms should try to keep them private.
e. Bill Holland case
The accountant with have been helping to run the business of insurance uses the method to
review if the customers are underinsured and not. There are been also many guiding stated for
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APES 110
the members of the business to work in accordance with them. In this particular case, it has
been observing that the clients are being used in order to seek the business office Insurance
Company. There were the fundamental principles and objectivity of the auditing rules and
regulations are violated. The auditor should also seek any type of vulnerability that has been
present in the accounts of the form by the use of which the business has obtained uncertain
profits. It has also been stated in section 340 of the auditing act that the members cannot use
the private information of the business in order to pursue personal gains for themselves.
f. Emma Lawrence case
As per the laws and the code of conduct which have been made as per the principles, it has
been clearly stated that the auditor and the Accountant of the firm can never be the same
irrespective of the size of the entity nature of the business or any other characteristic of the
organization or management. The main reason behind this is to not allow the accountant to
reviewers on work as there may be some kind of conflicts that may have been present in the
work which he will not want to identify at the time of auditing. If the auditor and the
accountant are different, then an unbiased decision and audit report will be processed. It has
been clearly mentioned in the sections 29o and 291 that any lack of independence of mind of
an auditor may be the cause of an influenced financial statement which will not provide the
shareholders with accurate information. Therefore, the job of auditors needs to completed in
an integrated and independent manner.
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APES 110
Solution 2
Situation - 1
Auditing of the green thumbs environmental has been done by auditor Enid Bytom which is a
newly listed small public company. There have been many unfavourable articles about the
contractor in the media after the company has tried to work with new contacts of disposal of
waste. The duty of the auditor that has been assigned to him is to provide the organization
with an opinion that has been based on the analysis of financial statements so that it can
improve its management.
It has been stated that there will be no Threads or problem during the assessment of the audit
report as there is no personal relationship of the auditor with the company whose financial
statement he is analyzing. It has also been a check that no influence has been made by the
company towards the auditor by the use of any monetary or bribery cases (Lapsley, 2012) .
The only job that the auditor should be concerned wastage to analyze financial statements and
provide a fair picture of the management and the business.
After the assessment of financial reports of the organization, the auditor should be able to
work in the rules and regulations of the entire standard so that he may now make valuable
decisions on the accounts. The only concern that is to be known by the company is to provide
environmental friendly management so that the waste disposal is done in an appropriate
manner (Elder et. al, 2010). This process can be affected by the decisions that are being made
by the auditor after the analysis of financial statements.
Therefore while analysis of the accounting reports of the organization the auditor should
make fair and two decisions in regard to the disposal of waste measures that are to be taken
by the organization and also the impact that it may cause in the company's management or
the profit statement of the organization (Cappelleto, 2010). Therefore in order to get a true
and fair solution, the financial statement should be properly assessed by the auditor.
Situation 2
It is the duty of the organization and the management to make sure that an audit process has
been conducted in the company and opinion on the same have been made with a true and fair
analysis of the accounts (Cappelleto, 2010). The auditor should provide necessary solutions
that can be used by the organization in order to manage the operating system. If the solution
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APES 110
that has been suggested by the auditor has not been taken into account then it should also be
adjusted in the audit report. In this particular case, it has been observed that the Dooley’s
have not been following the accounting standard of the valuation of inventory (Baldwin,
2010).
Because of the fair value of the inventory have not been evaluated in a proper manner,
therefore use impact have been made on the financial data of the firm. It has been stated by
the auditor that the 30% of the prior fees are due to him who should be paid so that he can
continue with his work. The company has also stated to provide 40% of the revenue but it is
not a possibility for the company in the significance to the audit report. Also, that have been
considered as there has been a substantial amount of is involved in this matter.
The company has also offered a trip to Europe for the successful completion of the audit
process to the auditor. This may be have been offered to the auditor because of the self-
interest that is present in the company's mind so that even after that it is being and paid the
auditor may provide a substantial report which is very profitable for the company (Geoffrey
et. al, 2016). Hence it can be stated that material influence is trying to be made which is
against the professional ethics and so the acceptance of gifts by the auditor should never be
allowed.
All other decisions and consideration that are made by the auditor should be clearly based on
the professional judgment and the financial statement analysis. Any types of gift that mash
indulge the auditor in the self-interest that should be refused as the main cause problems with
the Independence to the operations of the auditor (Lapsley, 2012). Therefore the report made
by the auditor should stand on the integrity and objectivity which is based on the firm’s
financial report.
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APES 110
References
Baldwin, S. (2010). Doing a content audit or inventory. Pearson Press.
Cappelleto, G. (2010). Challenges Facing Accounting Education in Australia. AFAANZ,
Melbourne
Elder, J. R., Beasley S. M., & Arens A. A. (2010). Auditing and Assurance Services. Person
Education, New Jersey: USA
Fazal, H. (2013, May 13). What is Intimidation threat in auditing?.Retrieved from:
http://pakaccountants.com/what-is-intimidation-threat-in-auditing/
Gay, G., & Simnet, R. (2015). Auditing and Assurance Services. McGraw Hill
Geoffrey D. B., Joleen K., K. K.S., & David A. W. (2016). Attracting Applicants for In-
House and Outsourced Internal Audit Positions: Views from External Auditors.
Accounting Horizons, 30(1), 143-156. https://doi.org/10.2308/acch-51309
Hoffelder, K. (2012). New Audit Standard Encourages More Talking. Harvard Press.
Kaplan, R.S. (2011). Accounting scholarship that advances professional knowledge and
practice. The Accounting Review, 86(2), 367–383. Doi:
https://doi.org/10.2308/accr.00000031
Lapsley, I. (2012). Commentary: Financial Accountability & Management. Qualitative
Research in Accounting & Management, 9(3), pp. 291-292.
https://doi.org/10.1111/1468-0408.00081
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