Auditing Ethics: MRA LLP Case Study on Independence & Safeguards

This case study analyzes the auditing practices of MRA LLP, focusing on their independence, ethical conduct, and adherence to public interest. The case highlights potential failures in maintaining auditor independence due to the provision of consulting services alongside auditing, as well as the im...Read More

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................3
References..................................................................................................................................4

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Answer to Question 1
The safeguard means the provision of the threat and the actions that may eliminate the
threat to and acceptable level. MRA LTD. might have achieved the safeguard into their work
through two broad ways (Brook et al., 2015). These are:
1. Safeguard created by their profession and legislation.
2. Following the safeguard into the work environment.
The below mentioned measures are into their professional safeguard.
 Education, Training and professional experience requirement while entering into the
audit profession.
 Requirement of the continuous professional development.
 Following corporate governance legislations and accounting standard.
 Maintaining professional standard into the professional work field.
 Professional and regulatory monitoring along with that the maintaining the
disciplinary procedures into the profession.
 Involving an external review of the report presented by the member. External review
need to be done by the legal empowered third party (cpaaustralia.com.au, 2019).
The company might have achieved the work environment safeguard through following
two broad ways (cpaaustralia.com.au, 2019). Such as: firm wide safeguard and engagement
specific safeguard.
The firm wide safeguard included the company’s policies and the principles that are
needed to be followed strictly by the company management. This emphasises on the audit
firm’s leadership towards representing the true value of the firm’s position. This includes the

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firm’s expectation of work in favour of public interest through bringing quality control into
the audit process (Sandvig et al., 2014).
On the other hand the engagement specific safeguard includes the engagement of third
party to review and prepare a fair and independent audit report. The firm could achieve the
safeguard through appointing whistle blower while. Further, the safeguard also includes
informing another firm to perform or re-perform part of engagement (Wan Hussin, Bamahros
& Shukeri, 2018).
Answer to Question 2
Maintaining public interest in to the audit work has been the primary ethic for an audit
firm while representing an audit report. This has been recognized that MRA LLP has failed to
maintain the public interest in many way while representing the report of their client. The
audit firm has a responsibility of representing true value of the company’s financial position,
size of the employees and the nature of the business into the audit report. This has been
recognized that the company did not represented a fully disclose of the financial position of
their client company PRAN LTD which has limited the opportunity of identifying the nature
of business, actual size of the employees and the true financial position of the PRAN. MRA
did not represent the true value of the company’s financial position which has enhanced the
possibility of wrong interpretation of performance and risk. The ethical dilemma into their
work process has been seen through identifying the misconduct into the audit management
process. Alongside the public interest has been destroyed through destroying the key audit
working paper (Espinosa-Pike & Barrainkua, 2016).

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References
APES 110. (2019). APES 110. Retrieved from https://www.cpaaustralia.com.au/professional-
resources/accounting-professional-and-ethical-standards/apes-110-code-of-ethics-for-
professional-accountants
Brook, R. K., Cattet, M., Darimont, C. T., Paquet, P. C., &Proulx, G. (2015). Maintaining
ethical standards during conservation crises.
Espinosa-Pike, M., &Barrainkua, I. (2016). An exploratory study of the pressures and ethical
dilemmas in the audit conflict. Revista de Contabilidad, 19(1), 10-20.
Sandvig, C., Hamilton, K., Karahalios, K., &Langbort, C. (2014). Auditing algorithms:
Research methods for detecting discrimination on internet platforms. Data and
discrimination: converting critical concerns into productive inquiry, 22.
Wan Hussin, W. N., Bamahros, H. M., &Shukeri, S. N. (2018). Lead engagement partner
workload, partner-client tenure and audit reporting lag: Evidence from
Malaysia. Managerial Auditing Journal, 33(3), 246-266.