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Presentation/PPT
27/08/2022
QUESTION 1 (24 MARKS)
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 not advise 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)Wendal Sailor, 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 Allgood Chartered Accounting 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 (16 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 not been following the 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.
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