Report on Auditing and Assurance Services: Ethical and Independence

This report delves into the realm of auditing and assurance services, focusing on ethical considerations and the maintenance of auditor independence. It begins by identifying various ethical issues, such as self-interest and lack of objectivity, and suggests safeguards like adherence to ethical principles and the allocation of sufficient time for engagements to mitigate these threats. The report then examines how overdue fees can jeopardize an auditing firm's independence and outlines actions the firm can take to address such situations. Furthermore, it analyzes a scenario involving a failure to detect fraud, attributing it to software limitations and incomplete information disclosure. The report concludes by emphasizing the importance of ethical conduct and adherence to professional standards in providing reliable and accurate financial reports, referencing various academic sources to support its arguments.

Auditing and Assurance
Services

Table of Contents
MAIN BODY.......................................................................................................................................3
Question 1.............................................................................................................................................3
a. Identifying ethical issues being faced..........................................................................................3
b. Safeguards procedures available to offset threat.........................................................................3
Question 2.............................................................................................................................................4
a. Threats and action affecting firms' independence........................................................................4
b. Response to managing director of Rodney Ltd...........................................................................5
REFERENCES.....................................................................................................................................6

MAIN BODY
Question 1.
a. Identifying ethical issues being faced.
Ethics is related with the moral values, beliefs and principles which has been made in the
context of better performance of every professional engaged in the business of rendering
professional services. Being an auditor, it is duty to perform audit function in the interest of the
firm. The ability and willingness of auditor in identifying fraud, mistakes and errors in the financial
statements is considered as one of the most important ethical as well as professional factor. It is
required on the part of auditor to deliver reliable, proper and clear picture about the financial
position of the company related to a particular time period.
As per the auditor's profession, it is essential to comply with all the professional code of
conduct as laid down by the authorities. Ethical issues can be related to number of factors which
includes – professional judgement made in inappropriate manner with self interest motive, failure in
maintaining objectivity, materiality as well as independence aspect while preparing financial
statement of the company etc. For mitigating ethical issues being faced, auditors are required to
adopt the following ethical principles:
1. Imperative principles – As per this principle, it helps the auditor with the opportunity of
directing the process of decision making and should behave in the manner as prescribed and
in accordance of ethical regulations (Ojasoo, 2016). With the help of this principle, the
auditor of Airedale Ltd is having option to monitor all the business processes and
transactions as undertaken during an accounting period. It helps company in identifying its
errors and frauds committed while recording such procedures.
2. Utilitarianism – In accordance with this principle, focus is made on determining the
consequences of applying such principle in-spite of following number of different ethical
rules and regulations.
b. Safeguards procedures available to offset threat.
It is the duty of every professional individual to assess every type of threat associated with
the business of which the auditor is having full information about it. The self – interest threat
basically arises from the act of auditor as undertaken by them in their own interest and benefit. In
terms of self interest it mainly includes interest of auditor related to emotional, personal as well as
financial nature. It is also related with the review provided by the auditors about its own as well as

work done by the other personnel in their business firms. Safeguards undertaken are related to the
control measures which helps in mitigating as well as reducing negative and ill impact of such
threats. While making decision related to the concept of engagement acceptance, continuance it is
the level of fees or profits/ income as anticipated which can become a threat to make proper
compliance with the ethical norms and behaviour of the auditors. It includes following safeguards
procedures:
1. Allocation of reasonable time period so as to complete engagement.
2. Taking active participations in the quality review procedures.
3. Remaining in touch with the consultation process with the technical professional in case of
issues covering most significant judgement (Johari, Mohd ‐ Sanusi and Chong, 2017).
4. Requiring proper and adequate supervision, monitoring as well as review of the engagement
process.
5. Assignment of more adequate and better skilled as well as qualified personnel in the team of
engagement.
Question 2.
a. Threats and action affecting firms' independence.
In case of overdue fees of company in respect of its previous auditing firm operations lay
down negative impact on the performance of auditor independence in following manner:
1. Overdue fees on part of Sportsresults – a - minute.com mainly affects the performance of
auditing firm when it comes to active engagement.
2. Also, in case of non availability of fees on time, it becomes impossible for auditing firm to
make compliance of applicable standards and norms. This further affects the performance of
auditing firm in carrying own auditing practices (Knechel and Salterio, 2016).
3. Furthermore, it can affect the judgement, integrity as well as objectivity aspect of auditing
firm as it financially depends on the client.
Action which can be taken by auditing firm in case of overdue fees includes:
1. Makes arrangement for payment of professional fees which is outstanding in case of prior
engagement with other previous auditing firms.
2. Undertaking measures for satisfactory arrangement of payment amount
3. Making it clear to the client company that no audit report will be provided in case of
outstanding professional fees amount of the previous year.

b. Response to managing director of Rodney Ltd.
Being an auditor it is duty of every professional individual to make compliance of all the
ethical norms and standards while publishing final report. In case of Rodney Ltd, inability of
auditors in detecting fraud has been arises due to failure in software which the company is using for
providing relevant as well as reliable information about the company pertaining to a particular
financial period. This error has been made on part of auditor because of inability of company's
software in delivering timely and correct information (Drogalas and et.al., 2017). As a result of
which, information about company's financial position has to be provided in manual form. Thus, an
error of omission has been occurred on part of company as a result of which auditors are unable to
detect such fraud.
Also, full disclosure about company's information has not been able to fetch by auditors
which further results in non detection of fraud.

REFERENCES
Books and Journals
Chervenak, F. A., McCullough, L. B. and Hale, R. W., 2018. Guild interests: an insidious threat to
professionalism in obstetrics and gynecology. American journal of obstetrics and gynecology.
219(6). pp.581-584.
Drogalas, G. and et.al., 2017. The effect of internal audit effectiveness, auditor responsibility and
training in fraud detection. Accounting and Management Information Systems. 16(4). pp.434-
454.
Johari, R. J., Mohd ‐ Sanusi, Z. and Chong, V. K., 2017. Effects of Auditors' Ethical Orientation and
Self‐Interest Independence Threat on the Mediating Role of Moral Intensity and Ethical
Decision‐Making Process. International Journal of Auditing. 21(1). pp.38-58.
Knechel, W. R. and Salterio, S. E., 2016. Auditing: Assurance and risk. Routledge.
Ojasoo, M., 2016. CSR reporting, stakeholder engagement and preventing hypocrisy through ethics
audit. Journal of Global Entrepreneurship Research. 6(1). p.14.
Online
Auditor Independence and unpaid fees. 2016. [Online]. Available through:
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