Codes of Ethics for Professional Accountants
Added on - 28 May 2020
Showing pages 1 to 3 of 8 pages
Running head: AUDITING PRACTICESAUDITING PRACTICESName of the Student:Name of the University:Author’s Note:
1AUDITING PRACTICESQuestion 1a.As per the provisions of APES 110 Codes of Ethics for Professional Accountantsstates that an auditor must maintain confidentiality about any information which theauditor had access to during the course of audit (Cpaaustralia.com.au 2018). As persection 140.1 of APES 110, an auditor is not required to disclose any informationwhich he has came across during the course of the audit to any third party or outsidebusiness. The auditor generally notes down important audit findings and informationin working papers which is known as the process of documentation (Backof 2015). Asper section 140.6 of APES 110, the auditor cannot disclose any information of hisclient even after auditor’s terms of engagement is over with that particular client. Theauditor cannot disclose any information of his former client to anyone.In the given case study,Mortdale Accounting firm is engaged in auditing ofvarious public sector companies and it has handed its working paper of one of itsclients to a new firm which is Penshurst Accountants who wants to review the auditprocess. As per the provisions of APES 110, it is clear that Mortdale Accounting firmmust not disclose or provide its working papers to any one unless law requires it to.Therefore in the above case there is a breach in ethical principle.b.The provisions of APES 110 do not state anything particular on the case study asgiven in the question. Howeverany firm must run a background check on the newemployee whom it is employing in the business. Another thing is that professionalcompetence must also be ensured that is whether the person is capable of performingthe job or whether the individual has the required skill and knowledge in the field.Therefore it can be said that there has been no breach in ethical standards asrequired by APES 110. As per APES 110, it does not contain any provisions relatingto the problem stated in the case study.
2AUDITING PRACTICESc.As per section 120.1 of APES 110, the principle of objective states that an auditorshould not compromise their judgement or become bias under undue influences ofothers. Another main principle of audit is that an auditor must be independent inmaking judgement on the financial statements of the client. As per section 220.1 ofAPES 110 a conflict of interest may arise when the auditor is engaged in the samebusiness and is competing with a public firm. This threatens not only objectivity butalso the principle of confidentiality. Moreover an auditor cannot advise a firm on itsservices prior to issuing an audit opinion on the same.As per the case study, Wendal sailor has acquired an insurance andsuperannuation business and he is also maintains its auditing professions. MoreoverWendal advises it clients on services before issuing an opinion. Hence it is clear thatWendal sailor has clearly breached the ethical standards of APES 110.d.As per the provisions of section 290 of APES 110, an auditor must be independentfrom the client. Independence as per section 290 can be classified in two kindindependence of mind and independence in appearance. The concept of independenceis crucial to the principles of integrity and objectivity for quality of the audit(Rahmina and Agoes 2014). Section 290 of APES 110 also makes it clear that if anauditor takes up or has a position in the client’s company such as the post of thedirector or if the auditor has some financial interest in the client’s company than suchwill be considered as threats to independence. Thus in the case given in the questionthere is a clear breach of ethical standards as the auditor holds the position of adirector in the non profit firm.e.As per the case given in the question Ernie Dengate sells her bookkeeping, tax andaudit working papers to another individual who bought the business. As per theprovisions of APES 110 Codes of Ethics for Professional Accountants, an auditor