Auditing Theory and Practices - Case Study

Added on - 28 May 2020

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Running head: AUDITING THEORY AND PRACTICESAuditing theory and practicesName of the StudentName of the UniversityAuthor note
1AUDITING THEORY AND PRACTICESTable of ContentsQuestion 1 Answers.........................................................................................................................21 A...............................................................................................................................................21 B................................................................................................................................................21 C................................................................................................................................................31 D...............................................................................................................................................4Question 2 Answers.........................................................................................................................42 A...............................................................................................................................................42 B................................................................................................................................................52 C................................................................................................................................................5Question 3 Answers.........................................................................................................................63 A...............................................................................................................................................63 B................................................................................................................................................73 C................................................................................................................................................7References........................................................................................................................................9
2AUDITING THEORY AND PRACTICESQuestion 1 Answers1 AAccording to the provided situation it is seen that Berowra Accountants are ensuring aguaranteed tax refund to their respective clients through using various advertising techniques. Inthis regard, it can be said that knowing the basic ideas regarding tax refund is important. Toexplain matters of tax refund, it can be said that tax refund is the difference between the paid taxand the tax that is owed (Galit and Metaban 2012). To identify whether a business corporation iseligible to receive tax refund, it would totally be dependent on the factors like income, profit andthe expenses related to the tax of the business organization. It would be impossible for themanagement of the organization to make sure a refund of tax. Not only is that, the chiefresponsibility of the auditors to examine the financial accounting of the business and locate thematerial misstatement and to check for the compliances. Therefore it can be said that for thecases of tax refund, it would surely be a non-audit service. Because of this according toAPES110 Code of Ethics for Professional Accountants, Section 130, the act of the accountants ofBerowra has breached the principle ofProfessional Competence and Due Care(Han Fan,Woodbine and Cheng 2013). As per this act, the auditors can retain their clients by knowing thelimitations of their professions and in this particular case study the accountants of Berowra failedto do so.1 BAccording to the provided case study, Jamie Harvey, the auditor of a charter accountingorganization is been asked to take up the responsibility of the treasurer in a nearby club and
3AUDITING THEORY AND PRACTICESHarvey only performs audit of bigger public organizations. In this regard, it must be mentionedthat in most cases the athletic clubs are considered as non-profit organizations. According to theAPES 110 Professional Appointment, Section 210, when the auditors accept the appointments ofa new client, the auditors should examine whether the appointment will influence the complianceof the fundamental principles of auditing. In this particular case study, when the proposal ofgetting the post of a treasurer gets accepted by the auditor, there was no breach of principlesbecause of some valid reasons (Ottaway 2014). These reasons are that as Harvey holds the postof an auditor in public concern and there are no similarity between the operation styles of theathletic club and the business organization where Harvey is employed. Another major reason isthat no fundamental ethical principle will get influenced because in case of the appointment inthe organizations that is non-profitable (Kuan 2014).1 CAccording to the provided case study, a situation is mentioned where the sum payable tothe auditor is dependent on the opinion of the outcome of the audit which is appropriate to theaudit client Monlec Ltd. It thus discloses that the management of Monlec Ltd is requesting for aaudit report that would be favorable for their organization. In this context, it would be necessaryto mention that the auditors represent the stakeholders and the investors; and not the businessorganizations. According toAPES 110 Principle of Objectivity, Section 120, the auditors mustnot show their business and professional judgment for any types of influence, biasness and anytypes of conflict of interest (Athanasiou 2014). It shows that the judgment made by the auditorsshould not be influenced by any sort of biasness. According to the case study, the report of theaudit provided by the auditor is somewhat favorable for the Monlec Ltd and there is a act ofcommitting a breach of principles of auditing. There should not be any types of infringement of
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