ACC300 Auditing Assignment - Ethical Violations and Audit Opinions

This ACC300 Auditing assignment solution addresses ethical violations and audit opinions. The assignment presents scenarios involving violations of ethical principles such as objectivity, confidentiality, and professional competence, and requires the identification of the violated principles and the reasons for the violations. The solution analyzes each scenario, explaining how the actions of the professionals compromise the ethical standards. Furthermore, the assignment explores different types of audit opinions, including unqualified, disclaimer, qualified, and adverse opinions, and provides justifications for the appropriate opinion in each case. The solution references relevant accounting standards to support the recommendations. The assignment covers various situations, including conflicts of interest, breaches of confidentiality, and failures to maintain professional competence, providing a comprehensive understanding of ethical considerations in auditing and the implications for audit opinions. This comprehensive solution is available on Desklib, a platform designed to assist students with their studies by providing past papers, solved assignments, and other valuable resources.

ACC300 AUDITING ASSIGNMENT
Question 1
(a)
The principle of objectivity says that members should avoid any forms of conflicts of interest or bias
that will affect their judgements. Alfred Jarmon has created a self-review threat by providing
additional services not related to audit. The reason is these additional services may have a
significant effect on the business financial statements that he will audit. Therefore, his independence
has been threatened
The principle of objectivity has been violated.
(b)
It is possible that the information stored on Wrench’s systems may be accessed by third parties who
are not the intended recipients. For example, at any time, the information can be accessed by any of
the company’s clients. Secondly, Wrench’s audit branch has access to the same information, and
may use this information in unethical ways. Therefore, the principle of confidentiality has been
violated.
(c )
The principle of objectivity has been violated.
Katrina has multiple roles within the Non-profit organisation. She is the manager to on an audit firm
to which audits the Non-profit organization. Furthermore, she is sited on the board of the non-profit
as a Director. Because of these multiple roles, it may prevent her ability to make an objective
decision. In other words, when Katrina is deciding a making a decision in relation to the organization,
if she does not provide proper safeguards, it may not be easy for her to remain objective.
The code of ethics says that Katrina should not accept offers which may threaten her independence.
Otherwise, she would breach the principle of objectivity.
(d)
Peter has multiple roles and therefore may be confronted with conflicts of interest when performing
his own accounting/auditing job. In addition he has other additional roles not related to audit. To
avoid these situations, Peter should implement appropriate safeguards in his firm. Examples of these
safeguards include setting chinese walls or employing separate teams for advisory and audit.
The principle of objectivity has been violated.

(e)
Accountants must maintain professional knowledge and ensure that their clients will receive
competent services.
By Berowa putting an ad showing they have the region’s highest tax deductions amongst most firms,
implies that that they are not acting as professional in regards to their clients.
Therefore, the principle of professional competence and due care will be violated.
(f)
Late fees should not affect the auditor opinions. There is no violation of ethics.
Solution 2
(a)
Audit Opinion- Unqualified opinion
The opinion will be unqualified, since our auditor has been able to use an alternative audit
procedure, thereby getting satisfaction on the balance of the account.
(b)
Disclaimer of opinion
The opinion issued should be a disclaimer of opinion for the following reasons:
a. The Plant, Property and Equipment represents 25% of the company’s assets, therefore it is
pervasive .
b. Also because the auditor cannot verify the value of the PPE or even go with an alternative
procedure to verify, there may be a material misstatement.
(c)
Audit Opinion- Qualified opinion
Contingent liabilities are potential future obligations which arose from the past. The occurrences of
contingent liabilities depend on the outcome of an event in the future.

AASB 137 says that companies should disclose contingent liabilities which are material. Furthermore,
the value disclosed should be a best estimate of value needed to cover the current liabilities (AASB
137, 2010).
Here, the firm did not disclose a contingent liability. Furthermore, this liability may be material in
value. As a result, there is a material misstatement, however the effects are not pervasive since it is
not known when the likelihood of the claim will happen. As a result, a qualified opinion should be
issued by the auditor.
(d)
Adverse opinion
Given they have not yet started using the Australian Accounting Standards; the opinion issued should
be an adverse opinion. The reason for this is their could be a misstatement as the statements don’t
show the firm’s true and fair view (AASB 101, 2015, p. 9).
References
AASB 101, 2015. Presentation of Financial Statements. [Online]
Available at: http://www.aasb.gov.au
AASB 137, 2010. Provisions, Contigent Liabilities and Contigent Assets. [Online]
Available at: http://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPoct10_01-
11.pdf