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Report on Auditing and Assurance Service

   

Added on  2020-05-16

18 Pages4499 Words161 Views
Running Head: Auditing and Assurance ServicesProfessional Ethics &Inventory Audit

Auditing and Assurance Services 1Executive summary:In this report, the ethical issues involved in the given case of OS Ltd are identified where the assistant of the managing director of the company has disclosed the insider information of thecompany with the external parties i.e. auditor and auditor’s relatives regarding the quotes bided by the auditor in the tender of provision of auditing services to the company. This information disclosure has given rise to certain ethical problems for all the parties involved insuch communication. For such ethical problems various courses of actions have been recommended in this report.Part AIntroduction:Andy smith is the senior manager of firm of auditors. The auditor is well known for the professional and personal skills possessed by him in the areas of auditing. However, Andy has a weak track record of building a wide client base for the firm. With the intention of securing the position in the auditing firm, the auditor is proposing to bring some new clients to the firm. In search of potential clients, Andy has prepared and presented the tender to be presented to the board of directors of Office Suppliers Ltd, which is a large of furniture and technology. The company is are considering the idea of replacing their existing auditor. Silvya, who is the assistant of managing director of the proposed company has communicatedsignificant matters regarding the MD’s evaluation of proposal of Andy’s firm with respect to the provision of audit services, to her neighbour who is the relative of Andy’s wife. In this

Auditing and Assurance Services 2way, Andy has come to know about the points that are being considered by the managing director of the company. Ethical issues involved in the case:Ethics are the moral principles to govern the behaviour of any person conducting any activity.In this case, the possible ethical issues involved in relation to each of the party mentioned above will be identified. The professional accountants i.e. the auditors acting in practice are required to maintain the trust of general public by maintaining highest ethical standards. Theyare supposed to follow the basic ethical principles of auditing profession. Those principles are: Integrity, objectivity, professional competence, confidentiality and the professional behaviour. The auditor is required to remain honest throughout the course of providing professional services (Rossouw, Prozesky, Plessis & Prinsloo, 2010). They are required to respect the confidentiality of their client’s information while they are engaged with such client to provide the various auditing services. They are also required to apply high level of competence and due skills to their professional engagement. Moreover, they must act in the interest of their professional values and hence should not bring any disrepute to the auditing profession. While complying with these fundamental principles, the auditor may have to face various potential threats arising due to a wide range of situations and relationships. These threats may range from self-interest threats to self-review threat, advocacy threat, familiarity threat and intimidation threat (APESB, 2010).Ethical issues with Andy, the auditor:Before accepting the audit engagement the auditor must ensure that whether the client is replacing their existing auditor or appointing an auditor for the first time. In this case, auditor’s firm was intended to be appointed in place of existing auditor of OS Ltd. Therefore, the firm of auditor was under the obligation to determine the reasons for which the existing auditor is not accepting the engagement for the further periods (Brown, Stocks & Wilder,

Auditing and Assurance Services 32007). Prior to responding to the tender of the auditing services, Andy must contact with existing accountant so that inquiries may be done in assessing whether there exists any professional or other related reasons for which the existing member is disassociating his name from the proposed client. Andy must have asked the existing auditor to provide such information and facts, which in his opinion are necessary to be known for the new auditor before accepting the audit. Also, the member in public practice must take due-permission of the proposed client, in writing, to communicate to their existing auditor. In the absence of such permission the auditor will be held guilty for the professional misconduct in carrying outthe professional services in practice. In this case, Andy does not seem to have made necessary and adequate efforts to communicate to the existing auditor of OS Ltd. and hence he must be found to be guilty of professional misconduct.The auditor must be selected as the auditor of the company on the basis of his own professional skills and competencies and not by the way of soliciting other people associated with the company for his appointment as the auditor. In this case the auditor’s intention of getting appointed as the auditor is correct but asking the help of employees of the company tomanipulate would not be an ethical manner of getting appointed as the auditor. Also, the firm of auditors is charging an unreasonable price for the audit of the proposed company which is not ethically justified. The involvement of relatives in the professional conduct of services or for obtaining a client is not an ethical manner of getting an audit appointment.In the current case the auditor may be influenced by the familiarity threat as it has close family relationships with a person i.e. Lisa, whose acquaintance i.e. Silvya is the employee ofthe proposed audit client i.e. OS Ltd. The idea of points on the basis of which the managing director of the company was in knowledge of Silvya and therefore it was communicated to Andy. This communication might have influenced the auditor to amend the tender as per the client’s evaluation basis merely for the purpose of soliciting the client. Such communication

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