Ethical Principles and Audit Report Contents

QUESTION 1.
(a) As per the APES section 110 subsection 114, a member should comply with the
principle of confidentiality at any given circumstances and not disclose information
without client’s permission and unless there is a professional requirement. James
Bromley before retiring provides helpful information to the new accountant Jayne
Godfrey with the permission from his client. Thus, it is not a violation of the ethical
principles. ("Code of Ethics - Institute of Internal Auditors (Australia)", 2019)
(b) An Audit Manager is a highly qualified person who not only has knowledge about the
different accounting standards but also has long-term working experience. Fred
Hingarra is an inexperienced auditor. Thus it is unethical for him to be an Audit
Manager.
(c) According to APES 110 subsection 115 and R115.2, exaggerated claims for the
services offered is not an acceptable professional behaviour and thus the Asquith
Accountants violates the ethical principles by advertising about their work.
(d) Going with the fundamental principle of APES section 110 such as Integrity which
means that Amy Harriss should, at all times, be honest in all her professional activities
and relationships; Objectivity which means Amy should not compromise her
judgement due to any biasness or under any influence; and Confidentiality which
means that she should maintain confidentiality of the information that she has
knowledge about, due to her professional activities. Since Amy’s firm does not audit
the athletic club, Amy can work as a treasurer in the club without violating the ethical
principles if she follows the 3 principles mentioned above. ("APES 110", 2019)
(e) In this case the ethical principles is not violated since the client’s expectation to pay
only after getting an appropriate final report is justified.
(f) David Dale is asked to provide not only new clients but also their information in
return of a commission 5% on each client. This is ethically wrong since he will have
to disclose personal information and thus violates the general ethical principles of
APES section 110 subsection 114. (Kaptein, 1998)

QUESTION 2
(a) Ellen Davis who had worked as an accountant in Jenkins Ltd. will also be a part of the
Audit team for the company. This creates a Self-Review threat since Ellen is aware of
the internal affairs. ("Threat To Auditor Independence Accounting Essay", 2019)
(b) In this case John Dargin is not under any threats of independence.
(c) This is a normal case. The Chocolate Company has invited to visit its second shop
does not cause any threat.
(d) Two kinds of threat to independence occur in this case- Self-Interest Threat and
Intimidation Threat; since The Expert Travel Company advises the auditor to be
flexible. Here the auditor has a fear of loosing his client if he does not obey him.
(Mbwambo, 2019)
(e) This is the case of Familiarity threat since a member of the audit team Elaine Ong is
engaged to the senior account of Elmtree ltd. James Bing.
(f) Diane Polo, senior auditor of the auditing team and Elise Lift, senior accountant from
Ranger Ltd. and few other members play softball in the same team. Thus, they have a
long term association with each other and therefore creates a Familiarity threat.
(Millichamp & Taylor, 2012)