Auditing and Assurance: Ethical Breaches and Audit Opinions Report

This report, addressing an Auditing and Assurance assignment, analyzes several scenarios to determine if they breach the ethical requirements of APES 110. It identifies the specific ethical principles breached in each case, providing a detailed examination of professional conduct. Furthermore, the report assesses various situations, recommending the appropriate type of audit opinion to be expressed, and justifying the choices based on the provided information, including the impact of limitations and misstatements on financial statements. The analysis incorporates relevant Australian Auditing Standards and considerations of going concern, material misstatements, and compliance with accounting principles. The assignment requires a 2000-word report and uses a minimum of ten reliable sources.

ASSIGNMENT
Name: Abdullah Javaid
Subject: Auditing and Assurance
Due date: 7th May
Make sure there is no more than 5% plagiarism (Software Turnitin)
Research requirements: Students need to support their analysis and solutions /
recommendations using current Australian Auditing Standards, the text and a minimum of
ten (10) suitable, reliable, current and academically acceptable sources
Presentation: 2000 words +/- 10% report.
QUESTION 1
The following situations may or may not breach the ethical requirements of APES 110.
You need to state whether they are or are not a breach of the ethical requirements of APES110
and if they are a breach of the ethical requirements state which ethical principle has been breached :
(a)The Mortdale Accounting firm had carried out several audits of public companies in the last year.It
now provided the working papers to the Penshurst Accountants who were carrying out a peer
review of the audits by Mortdale Accounting.The Mortdale Accounting firm does notadvise its clients
of these reviews.
(b) Jan Dungog,a CPA , applies to a local public accounting firm of Chartered Accountants, for a
position ,but asks the local public accounting firm not to contact her current employer.The local
public accounting firm do not contact her contact her current employer but hire her without
contacting them or her other referees .
(c)WendalSailor ,a chartered accountant,acquires an insurance and superannuation business as well
as conducting audits.During audits Wendal Sailor frequently contacts the firms during the audit
advising them of their other services prior to providing their final Audit Opinion.
(d) Judith Durham is the partner on an audit of a not for profit charitable organisation.She is also a
member of the Board of Directors but this position is honorary and does not involve her performing
any management function.
(e) Ernie Dengate sells his accounting practice which includes bookkeeping, tax and auditing.He
obtains permission for the release of tax working papers but does not request permission for the

others.He releases all the working papers from these functions to the new accountant,Jago ,who has
bought the practice .
(f) Fred Nerk ,a public accountant in a small country town,provides tax services,management
advisory services and does audits for the same clients.Sometimes the same person provides all these
services.
(g)The AllgoodCharteredAccounting firm maintains its records on various computers in its office.It
does audits on the Branch company and the Branch company has found its computer facilities are
inadequate for its needs and so the Allgood Chartered Accounting firm has maintained certain of the
accounting records of Branch company on its computers.
(h)James Jameson, a public accountant, stays too long at the annual Christmas party of his firm,the
Balgowlah Accountants and consumes too much alcohol and drugs. He subsequently goes into town
and is involved in a fight and is charged with assault on a person at a hotel as well as drunken and
disorderly behaviour when he attempts to drive off. He is subsequently convicted and sentenced to 3
month in gaol as well as having his license suspended for 1 year.
QUESTION 2 ( 8 MARKS)
Indicate the type of opinion that should be expressed in each of the following situations, providing
reasons for your choice .
(a) The auditor was unable to obtain confirmations from eight of the client’s major customers that
were included in the sample however the auditor was able to satisfy himself about the balances of
these accounts using other audit procedures.
(b)The client restricted the auditor from carrying out procedures to verify the property ,plant and
equipment .The property, plant and equipment comprises 35% of total assets..
(c) Management have excluded from the financial report the necessary disclosures in relation to
a contingent liability .If this becomes an actual liability it will have a material effect on the financial
report when it becomes an actual liability.
(d) A significant proportion of a retailer’s sales are made on a cash basis but the internal controls are
inadequate and the value of these cannot be verified . There are no audit tests that can be done to
assure yourself that cash sales are being recorded or are correct
(e)You have been asked to do the audit for a new client this financial year .While you are satisfied

that there appears to be no material misstatements for the information during the current financial
year the client will not provide any information about the opening balances of accounts at the start
of the financial year.
(f) You have just started auditing the financial statements of a client which has theinnot been
followingthe Australian Accounting Standards since it began operating four years ago.
(g) A client has been using the LIFO method of accounting for inventory which is disallowed under
the Australian Accounting Standards.This has had a material effect on the financial statements
however its effect is currently limited to the effect on the Inventory value
(h) The auditor of Numark has just completed the audit and is satisfied that there are no material
misstatements however the client’s continuation as a going concern is in extreme doubt as its major
customer has gone into liquidation and it appears very unlikely that other customers will take its
place due to the highly specialised nature of its products.