Required: (a) Explain the ethical problem in this case. Why is it a problem? (b) What can be done about it?
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Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includes managing the business affairs of the firm, and she is very worried about the amount of fees outstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, has not paid its audit fees for two years despite numerous discussions between Liona, their audit partner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management has promised the fees would have been paid before the audit report for this year has been published, Liona rang Ball this morning to ensure that the audit report was not issued because Broomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers that Ball is about to sign the audit report.
Required:
(a) Explain the ethical problem in this case. Why is it a problem?
(b) What can be done about it?
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Solved in 2 steps
- Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includes managing the business affairs of the firm, and she is very worried about the amount of fees outstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, has not paid its audit fees for two years despite numerous discussions between Liona, their audit partner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management has promised the fees would have been paid before the audit report for this year has been published, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers that Ball is about to sign the audit report. (a) What can be done about it?Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management has promised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. Required:(a) Explain the ethical problem in this case. Why is it a problem?). (b) What can be done about it?Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management haspromised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. 4Required:(a) Explain the ethical problem in this case. Why is it a problem? (b) What can be done about it?
- Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management haspromised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. 4Required:(a) Explain the ethical problem in this case. Why is it a problem? (150 – 200words)(b) What can be done about it? (50 – 100 words)Required: (a) Explain the ethical problem in this case. Why is it a problem? words) (b) What can be done about it? --Grant Thornton was appointed as the new auditing firm for a publicly listed IT Company. The auditing firm's Engagement Partner, an IT expert, has just replaced the previous partner only this year. The previous partner left the firm to become the Finance Director of a competitor IT Company. Which of the following ethical principles will be least breached by the previous partner in the given situation? a. Confidentiality b. Objectivity c. Integrity d. Professional Competence
- Julia is a CPA employed by Super Great Value (SGV) and Co. Cecilia is a partner, and her cluster is engaged in an audit of the financial statements of Jellybean Fruits Corporation (JFC). During the preliminary conference with JFC's audit committee, one of the committee members made the following suggestions to Ms. Julia:That last year's audit was finished by SGV on time, but JFC is requesting for a shorter audit period this year.That last year's audit work be divided among more team members this year. Last year's audit involved three audit associates. For this year, four members should be included. JFC is willing to pay for any additional costs it may entail.That one associate should be working auditing current assets and current liabilities; another associate should focus on property and equipment and non-current liabilities; another associate should focus on the minutes of the board's meetings and the shareholders' equity accounts; and the last associate will audit the income and…Is it an entity inherent risk for the information below? Supervisors working at Marco Inc. interview all perspective employees for positions they supervise. In addition, at least one of the corporate officers also interviews each perspective employee. Most of the key employees, including the officers, have been with Marco for more than ten years. However, due to the high demand for accountants, Stephen Violet an accountant and most of the accounting staff have been employed at Marco for less than 3 years. While Marco checks references for any prospective employee, they do not check criminal records or perform other forms of background checks. If it is an inherent risk, what is the feature of the firm that will possibly affect inherent risk and explain how and why; that is whether it increases or decreases inherent risk. Please address a specific risk to the accuracy of the financial statements with the "how" and whether audit effort should be increased or decreased for specific…You are the audit partner at Parkville & Associates, a mid-tier audit firm. You are responsible for the audits of the following four independent entities for the year ended 30 June 2018:(a) Human Help Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 55 per cent of its expenses, excluding salaries and allowances (b) JJ King Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, JJ King also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. JJ King then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and hold to their view that the stock of properties…
- You are the audit partner at Parkville & Associates, a mid-tier audit firm. You are responsible for the audits of the following four independent entities for the year ended 30 June 2018:(a) Human Help Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 55 per cent of its expenses, excluding salaries and allowances(b) JJ King Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, JJ King also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. JJ King then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and hold to their view that the stock of properties is…Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend Juarez Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.” Identify ways in which a financial statement audit adds value for clients. List services other than audits that Czarnecki and Hogan likely provides. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.For each of the following situations involving relations between auditors and the companies they audit, indicate whether it violates IFAC’s Code of Ethics for Professional Accountants and the rationale for the applicable guideline. Paul Asante, CPA, discloses confidential information in a peer review of the firm’s quality control procedures. Frank Smith, CPA, is auditing a company in Ghana, which has offered to send him and his wife on a holiday in Hawaii for two weeks. Tabula Gonzales, CPA, says in an interview in the local paper that Emilio Rios, CPA, misleads his clients about the quality of his audit work.
