Ethical Principles in Auditing: Case Study Solutions and Analysis

This assignment solution delves into ethical principles within the field of auditing, analyzing several case studies to illustrate the application of these principles. The solution addresses scenarios involving auditor responsibilities regarding client information disclosure, professional competence, advertising practices, and the conduct of audits for non-profit organizations. Each case is examined in light of the IIA Code of Ethics and other relevant guidelines, providing a clear understanding of ethical obligations and potential violations. The solution emphasizes the importance of maintaining confidentiality, demonstrating professional objectivity, possessing necessary skills and experience, and adhering to advertising standards. By analyzing these cases, the document provides a practical guide to ethical decision-making in auditing, ensuring adherence to professional standards and promoting ethical conduct.

ETHICAL PRINCIPLES 1
ETHICAL PRINCIPLES

ETHICAL PRINCIPLES 2
Part a:
As per the code of ethics that have been laid down for the auditors, each auditor has the duty
of respecting the value and the ownership of the information that they receive and would not
disclose in the information without any adequate authority unless and until there is a legal or
a professional obligation for the compliance of the same (The IIA, 2017).
As per the case study, the auditor of the company is in the course of retiring and had the work
of tax audit, general accounting practice of a company. Now when another auditor is taking
over his practise, he is duty bound to disclose all of the information that he is in possession of
with regard to his client. But it is also true that he is duty bound to inform about such
disclosure to his client. This has already been done by James. Hence, there is no violation of
the ethical principles.
Part b:
The auditors are expected to apply the following when it comes to conducting his duties:
 He must establish trust and provide a basis for reliance on which he would rely on
their judgment
 He must carry on his duties with an utmost care and maintain a high level of
professional objectivity when it comes to gathering, evaluating and communicating
the information about the activities and the processes
 He must confide any information that he has obtained during his course of
employment
 He must possess all the necessary knowledge, skills and experience that are required
to carry on their duties (The IIA, 2017).

ETHICAL PRINCIPLES 3
In the given case study, Fred had been playing soccer professionally but has now restarted his
accounting practices, then assuming that the above principals have been duly satisfied with,
there is no violation of any ethical principle.
Part c:
As per the ethical principles, an auditor is expected to undertake only the professional
services on which he has no control over and that the member or the member of the firm is
expected to compete with his professional competence (PCAOBUS, 2017).
In the given case, study, the firm advertises that it guarantees tax refunds which is wrong.
This is so since the accountants, they have been guarantying the tax refund which is beyond
their control and is not also in their professional capacity.
Part d:
The auditors are expected to apply the following when it comes to conducting his duties:
 He must establish trust and provide a basis for reliance on which he would rely on
their judgment
 He must carry on his duties with an utmost care and maintain a high level of
professional objectivity when it comes to gathering, evaluating and communicating
the information about the activities and the processes
 He must confide any information that he has obtained during his course of
employment
 He must possess all the necessary knowledge, skills and experience that are required
to carry on their duties

ETHICAL PRINCIPLES 4
Though Amy has never conducted an audit of a non-profit organisation, but if she is able to
carry on the duties as per the above stated code of ethics, then there is no general principles
violation.

ETHICAL PRINCIPLES 5
References:
na.theiia.org. (2017). CODE OF ETHICS. [online] Available at:
https://na.theiia.org/standards-guidance/Public%20Documents/IPPF_Code_of_Ethics_01-
09.pdf [Accessed 18 Sep. 2017].
Na.theiia.org. (2017). Pages - Code of Ethics. [online] Available at:
https://na.theiia.org/standards-guidance/mandatory-guidance/Pages/Code-of-Ethics.aspx
[Accessed 18 Sep. 2017].
pcaobus.org. (2017). ETHICS AND INDEPENDENCE RULES CONCERNING
INDEPENDENCE, TAX SERVICES, AND CONTINGENT FEES. [online] Available at:
https://pcaobus.org/Rulemaking/Docket017/2005-07-26_Release_2005-014.pdf [Accessed 18
Sep. 2017].