Evaluating Ethical Conduct: Case Study Analysis of APES 110 Violations

This assignment provides an assessment of three case studies to determine whether they violate the general ethical principles for auditors as outlined in APES 110. The analysis covers scenarios involving auditor independence, acceptance of gifts, and professional expertise. The first case examines a car dealership offering a discount to an auditor, potentially compromising independence. The second case involves an auditor receiving cosmetics as a Christmas gift, violating the principle against accepting gifts that could bias the audit report. The third case discusses an auditor lacking the necessary expertise accepting a computer system installation project, which goes against ethical guidelines. Each case is evaluated based on relevant ethical principles, and the report concludes whether a violation occurred and why.

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By student name
Professor
University
Date: 25 April 2018.
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Executive Summary
In the given assignment, an assessment has been done based on the given case studies as to
whether or not they satisfy the genral ethical principles for auditors or are in violation of the
same. It is governed by the provisions mentioned in APES 110. The report also highlights which
ethical principle has been compromised and how the same is a violation or not.
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Contents
Question No. 1.............................................................................................................................................4
Part A.......................................................................................................................................................4
Part B.......................................................................................................................................................4
Part C.......................................................................................................................................................5
References...................................................................................................................................................6
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Question No. 1
Part A
In the given case, Jenny Wang has been auditing the company named Panania Car Pty Ltd.
which deals in the business of selling the old and the new cars. She is the senior auditor and the
sales manager of the company tells her that the company will be introducing a special sales
discount shortly for the long associated dealers with the company and since she, as an auditor has
been associated with the company for more than 6 years will be given 20 percent discount on the
purchases of car (Dichev, 2017). As per the General Ethical Principles, this may have an impact
on the independence of the auditor as it may persuade the auditor to give the biased report for the
company. There might be prejudice involved in case of such a situation. Independence is one of
the quality control aspects which needs to be followed by the auditor while performing its work
and therefore the audit report released by tehm should represent the true and fair view of
accounts.
Part B
In the given case, Katrina Wearne has been conducting the audit of her client Lancom Cosmetics
since November and December and now the company gave her some cosmetics items worth $
350 as the Christmas gift. This again is not in compliance with the rules of General Ethical
Principles and professional ethics mnetione in APES 110 which mentions that the auditor should
not accept any gifts or monetary considerations other than the audit fees due to terms of the audit
engagement (Bizfluent, 2017). This is also one of the critical clause that is being mentioned in
the terms of engagement letter. The general ethical principles restrict the auditor to receive or
accept any such gift or belongings as it may lead to biasness in the prepration of the audit report
and may also result in some sort of sympathetic atiitude towards the client at times.
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Part C
In the given case, the client seeks assistance for the installation of the computer system from teh
company’s auditor D. Marron, who is a chartered accountant by profession (Saeidi, 2012). The
installation of the computer is required for maintenance of the inventory and the production
records but since D Marron is not having the requisite professional skill and expertise to do the
given job, he engages the computer consultant to do the same on whom he has confidence to cary
out the given work. Now, since the work is beyond the professional expertise of Marron, he is
not able to review the same and just agrees to give a go ahead to the computer consultant for
installation once the client says yes. This again is against the rules and guidelines stated in the
General Ethical Principles as the chartered accountant should not have accepted the engagement
or work as it falls beyond the professional expertise. This would make him responsible and
accountable for the work accepted by him (Raiborn, et al., 2016). However, the services of
computer expert could have been done by the auditor in case the need arises during the course of
the audit to use the services of the expert.
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References
Bizfluent, 2017.
Advantages & Disadvantages of Internal Control. [Online]
Available at: https://bizfluent.com/info-8064250-advantages-disadvantages-internal-control.html
[Accessed 07 december 2017].
Dichev, I., 2017. On the conceptual foundations of financial reporting.
Accounting and Business
Research, 47(6), pp. 617-632.
Raiborn, C., Butler, J. & Martin, K., 2016. The internal audit function: A prerequisite for Good
Governance.
Journal of Corporate Accounting and Finance, 28(2), pp. 10-21.
Saeidi, F., 2012. Audit expectations gap and corporate fraud: Empirical evidence from Iran.
African
Journal of Business Management, 6(23), pp. 7031-41.
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