University Auditing Assignment: Ethical and Reporting Issues

This auditing assignment addresses several scenarios related to ethical breaches and auditing procedures. The assignment analyzes situations through the lens of APES 110, focusing on ethical considerations like commission payments, confidentiality violations, conflicts of interest, and adherence to professional standards. It examines specific breaches such as improper referral fees, misuse of confidential information, and failures to maintain independence. The assignment also delves into practical auditing procedures, including external confirmations, scope limitations, and the handling of contingent liabilities, referencing relevant Australian Accounting Standards (ASA) and Australian Accounting Standards Board (AASB) guidelines. The student provides detailed answers, referencing relevant sections of the ethical codes and auditing standards to support their analysis and recommendations for resolving the identified issues.

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

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Table of Contents
Answer to Question 1a.........................................................................................................2
Answer to Question 1b........................................................................................................2
Answer to Question 1c.........................................................................................................3
Answer to Question 1d........................................................................................................3
Answer to Question 1e.........................................................................................................4
Answer to Question 1f.........................................................................................................5
Answer to Question 2a.........................................................................................................5
Answer to Question 2b........................................................................................................6
Answer to Question 2c.........................................................................................................7
Answer to Question 2d........................................................................................................7
References............................................................................................................................9

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Answer to Question 1a
The given situation needs to be considered with accordance to APES 110. The relevant
section under this procedure can be inferred with the application of “Part B – Members In
Public Practice”. The discourse of this section informs the client for any incidence of
commission or referral fees received from the client. In the given case, elevated Alfred Jarmon
frequently insisted the clients for taking services from Computer Service Ltd. However, the
ethical breach can be identified when the company agreed to pay a commission of 10% for
referral leads. This ultra vires “Section 210 Professional Appointment”. The aforementioned
section has obligated the members in public practice for approval of engagement in professional
appointment. A comparable nature of breach may be further considered with “CPA Australia’s
Client Relationship Guide”. The violation of code of ethics needs to be further inferred with
“Section 280 Objectivity – All Services”. As per this section in the professional services
provided in regard to public practice may involve threat of compliance. For example, as for the
given case threat of objectivity can be referred with providing commission for referral to Alfred
Jarmon which is unethical (Louwers et al. 2015).
Answer to Question 1b
The given issue needs to be resolved as per fundamental principle of confidentiality. This
principle has agreed that in order to maintain confidentiality of any information any professional
body should not disclose any information to the third parties. Moreover, the sharing of
information is forbidden without prior approval of responsible authority unless a legal guide is
involved for the disclosure of any such information leading to personal gain for the members of
the third parties. The given case study identifies that Wrench and company has permitted its
client or third-party members for using the computer for their personal use. The company has

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also allowed the relevant personnel from audit team to assist input of data. The ethical risk can
be clearly referred to “Section 350 Inducements”. This section prevents the members of any
business to influence decision-making for the purpose of gathering confidential information.
Therefore, in this case the third-party members may influence the auditors to obtain valuable
information of the company which may lead to reduced sales. The following incident ultra vires
“Section 220 Conflicts of Interest” as the members may manipulate confidential information of
the company for their personal gain (Hay, Stewart and Botica Redmayne 2017).
Answer to Question 1c
The application of APES 110 is seen to be relevant with “Part C – Members in
Business”. The following section infers that even in case members in a business are employed in
not for profit sector there is possibility of violation in fundamental ethical code of conduct. The
aforementioned section evaluates the different types of threats which may be faced for
safeguarding regulation, legislation and work environment. The given discourse shows that
Katrina Ng is holding the post of manager in a not for profit entity. At the same time, she is also
a member of board of directors. This prevents her from having an acting role in management
capacity of not for profit entity. This can be related with the breach of “Part C – Members in
Business”. The appropriate treatment for such incidence should be accounted with considering
her role in not for profit entity. In the given case she may also need to seek for legal advice in
any instance of unethical behaviour. Due to the nature of application of such a section of ethical
conduct she may also take the decision of resigning from the employing organisation (Carson,
Fargher and Zhang 2016).

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Answer to Question 1d
In the given scenario the integrated principle is violated. As per this principle, it expects
that the member of organisation will be candour and honest at the time of getting involved in
professional business relationship. Based on the reference of APES 110, “Sections 290 And
291– Independence”, the conceptualisation of independence can be regarded with the principle
of objectivity and integrity. Henceforth, any possibility of threats to integrity and independence
should be followed with this code of conduct. The aforementioned section also expects its
member in the business practice to safeguard measures for removing any possibility of threat
which may be induced in a business. Based on the given case, Peter Beetson is not only
employed as a public accountant who provides different types of management advisory service
and bookkeeping service but also has acting role as treasurer in Northbridge Joggers Club. The
implementation of the principle of independence is essential in the given situation for eradicating
any possibility of threat for the members who are engaged with ethical misconduct as it is
evident in this case with employment in two organisation family simultaneously. The main
concern is associated with ethical misconduct which may be having an active role for both
treasurer and public accountant (Nisbet et al. 2018).
Answer to Question 1e
The given case needs to be followed with “Section 250 Marketing Professional
Services”. As for the section on the various types of professional marketing services such as
advertising may have a significant impact on compliance associated to fundamental principle.
Therefore, it is the role of the members in public practice for ensuring that at the time of
marketing professional service they are not bringing any misconduct to accounting profession.
However, as per the given case The Berowra Accountants have claimed for achieving highest tax
deduction from all firms in particular region. The company has used the best possible way in the

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newspaper to portray the same. This can be referred to set out many questions which relate to
integrity of the organisation and also possible threat related to fundamental principle in public
practice. Such an incidence can also lead to accounting profession to disrepute. The advertising
with the use of bright colourful pages for such a reason may bring disrepute to the accounting
profession as the taxpayers have a defined set of rules for paying their taxes. Henceforth, any
instance of claim for tax deduction may be raising possibility for evading tax (Bunn, Pilcher and
Gilchrist 2018).
Answer to Question 1f
By referring to the given case it can be understood that there has been a breach of
professional code based on “Part A General Application of The Code Acting in The Public
Interest of Apes 110”. This section shows that the organisation is needed to comply with laws
and regulation which is associated in preventing any instance of discrediting accounting
profession. As per the given situation there has been a neglect of payment of audit fees for year
ended 30 June 2017 by Olive Limited (Sam and Tiong 2015). The application of “CPA
Australia’s Client Relationship Guide” further states incidence of breach of objectivity.
Henceforth, such a violation of ethics can be also referred with “Section 280 Objectivity – All
Services”. The discourse of this section mentions that at the time of providing professional
advice to the members in public practice it is essential to mention if there is any incidence of
threat for compliance. For example, based on the given situation Olive Limited may have
decided to put an augmented focus for identifying any instance of breach of professional
behaviour which is associated to objectivity. They should have ensured this by payment of audit
fees for 30.06.2017 (Heenetigala and Armstrong 2017).

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Answer to Question 2a
As per the given case it needs to be inferred that there was no confirmation being made
from four major customer who submitted their initial sample. Despite of this, the auditor was
satisfied about balances of the accounts after analysing them with relevant audit procedure.
Based on this situation, it is necessary for the auditor draft a letter in order to obtain a
confirmation before the customers in order to proceed with auditing. The following situation
needs to be also investigated as per ASA 505 revised standards. The guideline will be essential
for providing the necessary guidance for the performance of external confirmation process in
auditing pertaining to 3rd parties. The external confirmation needs to be further investigated as
per ASA 315 and ASA 330 (Britt and Miller 2017). Moreover, the implementation of ASA 500
will allow external confirmation to be directly obtained through electronic medium. In this
context, the confirmation is needed to be proceeded with a positive response and asking the
client’s whether they want to proceed with auditing. The external confirmation will be also able
to ensure about addressing of the necessary request for keeping a record of approval given by
confirming party (Liao, L., Lin and Zhang 2018).
Answer to Question 2b
The aforementioned scenario shows that auditor is being restricted from investigating
property plant and equipment. These directly ultra vires pervasive scope limitation and
explanatory paragraph given as disclaimer statement. The purpose of application for such a
procedure is seen with client not being allowed for carrying out the audit procedure as per
professional guideline of auditing. The conceptualisation of pervasive scope limitation can be
further inferred with client imposing significant restriction over the auditors and preventing the
auditor from gathering suitable evidenced to form an audit opinion (Griffiths 2016). In the given
case, PPE can be referred with significant possibility of misstatement which may have a material

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effect on the audit report and the auditor needs to avoid such misinterpretations go undetected. If
it is decided by the auditor to proceed with audit opinion it is also essential for clearly
mentioning the same in the notes to financial statement about the exact treatment which is to be
done for PPE. This is for the purpose of maintaining a clear communication with the users of the
financial report pertaining to the treatment of PPE. This shall also enable the organisation to
communicate on how the modification has been applied on the financial report. The tender of
“disclaimer of opinion” (Knechel and Salterio 2016).
Answer to Question 2c
It can be clearly identified that the management has decided to not include any contingent
liability unless it is having any material impact on the financial reports. However, based on the
application of AASB 137, financial entities must disclose contingent liability under the notes to
financial statement for allowing the users in better understanding the nature, timing and amount
of such liabilities. Furthermore, such liabilities can be only excluded under extreme cases where
it is not possible to make appropriate estimate in the financial report (Debnath 2019). Despite of
this, in the given context the management has appropriately evaluated the total amount of
contingent liabilities as it stated on the possibility of being treated as actual liability which would
have had a material impact. Even if the company does not incur any material impact, based on
paragraph 89 of AASB 137 it is essential for disclosing such an information if there is any scope
of economic benefit in future. Therefore, it is essential for the company disclose such an
information as there may be significant scope of uncertainties associated with the total
expenditures in a particular financial year (Soh and Martinov-Bennie 2015).

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Answer to Question 2d
The given aspect explains the adoption of section 9 of ASA 315 based on which if a
professional entity uses any information based on previous accounting standard then such
changes can be amended with relevance to the current accounting procedure by the auditor. It
can be seen as a responsibility of the auditor for examining the nature of internal control and
entity’s environment which is essential for depicting any considerable changes in the assessed
area of risk (Yee et al. 2017). Therefore, it is essential for the auditor to obtain any such
information which will compensate the changes in the control environment based on current
accounting standards. It can be further stated that the responsibility of auditor should be able to
make amendments in the areas of possible material misstatement in the value of assets which can
have a substantial change in the profit amount. Therefore, the previous standards used in the
financial statement should be adjusted as per present standards by the auditor (Rahim and Idowu
2015).

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References
Britt, H. and Miller, G.C., 2017. Measuring general practice activity in Australia: A brief
history. Australian Family Physician, 46(5), p.343.
Bunn, M., Pilcher, R. and Gilchrist, D., 2018. Public sector audit history in Britain and
Australia. Financial Accountability & Management, 34(1), pp.64-76.
Carson, E., Fargher, N. and Zhang, Y., 2016. Trends in auditor reporting in Australia: a synthesis
and opportunities for research. Australian Accounting Review, 26(3), pp.226-242.
Debnath, S., 2019. Sustainability Reporting Assurance-A Structured Literature Review.
Griffiths, P., 2016. Risk-based auditing. Routledge.
Hay, D., Stewart, J. and Botica Redmayne, N., 2017. The Role of Auditing in Corporate
Governance in Australia and New Zealand: A Research Synthesis. Australian Accounting
Review, 27(4), pp.457-479.
Heenetigala, K. and Armstrong, A.F., 2017. Credibility of sustainability reports of mining sector
companies in Australia: an investigation of external assurance. Economic and Social
Development: Book of Proceedings, p.335.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.
Liao, L., Lin, T.P. and Zhang, Y., 2018. Corporate board and corporate social responsibility
assurance: Evidence from China. Journal of Business Ethics, 150(1), pp.211-225.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing
& assurance services. McGraw-Hill Education.

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Nisbet, D., Robertson, A., Mannil, B., Pincham, V. and Mclennan, A., 2018. Quality
management of nuchal translucency ultrasound measurement in Australia. Australian and New
Zealand Journal of Obstetrics and Gynaecology.
Rahim, M.M. and Idowu, S.O. eds., 2015. Social Audit Regulation: Development, Challenges
and Opportunities. Springer.
Sam, C.Y. and Tiong, P.N., 2015. An investigation of the corporate responsibility report
assurance statements of the Big Four banks in Australia. Journal of Economics Library, 2(1),
pp.3-14.
Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in
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Journal, 30(1), pp.80-111.
Yee, C.S., Sujan, A., James, K. and Leung, J.K., 2017. Perceptions of Singaporean internal audit
customers regarding the role and effectiveness of internal audit. Asian Journal of Business and
Accounting, 1(2), pp.147-174.