Question 1. Ethical Considerations
(A)
As an auditor when provide professional service and client have to follow the fundamental principle of the code of Ethics
Integrity
An auditor has to be fair and honest to the client. There is an obligation on the auditor to be straightforward and honest in all the professional and business relationships.
In this case, an auditor has to be integrity to present their honest and fair to the client. Even Game’s Limited’s managing director is unhappy with the existing auditing firm has been changed.
Objective
An auditor has to be objective and fair. Auditor has to be fairness and objective to provide financial report. The client’s point of view must not affect auditor’s objective.
In this
…show more content…
Question 2 Audit Risk and Materiality
(i) Inherent risk- Any risk to material misstatement given the inherent and environment characteristics.
In this scenario, it is inherent control risk. The treasure has realized a small profit for the company through foreign-exchange transaction in yen. The foreign exchange rate is floating every day. It is depend on the economic environment. Past two month, Japanese Yen was at the high position. It could be at the low position sometimes. At that time, there will be lost in the transaction.
(ii)
Inherent risk- Any risk to material misstatement given the inherent and environment characteristics.
In this scenario, Hoover has planned to close inefficient factory, the factory is in efficient depend on the economy. That is inherent risk.
Detection risk- defines as the risk that an auditor’s substantive procedures performed to reduce audit risk to an acceptably low level will not detect a material misstatement
In this case, the financial controller is very confident that he will be able to determine reasonably accurate closure provisions.
(iii) Inherent risk- the risk may not be prevented or may not be promptly detected and corrected by the entity’s internal control.
In this scenario, the bonuses will increase inherent risk of the work’s quality.
(iv) Inherent risk- Any risk to material misstatement given the inherent and environment
The auditor¡¦s responsibility is to the client and not the third parties the client plans to distribute the financial statements to. The auditor does however consider the third parties when completing the audit. There is no direct responsibility to the third parties.
The factor that plays the greatest role in determining auditor independence is independence in mind. Auditors may or may not appear to be independent, but if the auditor is truly independent in mind, then the auditor can remain objective and unbiased. The profession should consider tightening the Code of Professional Conduct to address the issue of an audit team member knowing a close friend that holds any position at the audit client. If this scenario arises, the firm can still audit the client, but the audit member with the close relationship won’t be able to be on the audit team.
Risk refers to any potential problems that would threaten the likelihood of success for or any project. These potential problems might prevent a project from achieving some or all of its objectives by increasing time and cost. Risk factors can even
Proper conduct and ethical behavior are important, because auditors are party to confidential information and it is important this trust not be abused. This essay discusses the purpose of the American Institute of Certified Public Accountants (AICPA) and delves into the definitions of the six principles of the Code. It explores to whom this Code applies and what should be considered its key principle. The next
Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the
The accounting system is constantly changing. During these changes, it is important for accountants to adhere to the high ethical standards that they have always lived by. Adhering to the high ethical standards is an accountant's obligation to the public, the profession, and themselves. An accountant's ethical conduct usually lies within four different areas. This includes competence, confidentiality, integrity, and objectivity. NYSSCPA.ORG states, "Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public's confidence, and carry out the professions special responsibilities for self-governance," (Article 1).
This research paper analyzes the degree of an auditor's liability to clients and third parties under applicable law.
According to the Public Company Accounting Oversight Board (PCAOB), The primary objective and responsibilities of auditor is to express an opinion on the fairness with which all financial statement including all of its (material aspects, financial position, the result of the company operation and its overall level of cash flows) AU Suction 110. Thus, what this means is that auditor must be fully independent and must be fully able and willing to apply professional judgment as it relates to the audit engagement under consideration.
Ethics are a major issue which is a reason why the Sarbanes-Oxley Act was implemented. Before the Act, firms focused on growth but not as much on professional values. Revenue was the driving factor in auditing firms, and auditors were required to find new clients, keep existing clients, and cross selling. There were also penalties for not obtaining these requirements which could lead to termination (Jones III & Norman 2006). Since the Act many organizations have now implemented a code of conduct (ethics) which sets standards of how an auditor is supposed to act or a place to go to seek advice on handling different situations. The code of conduct or ethics can be viewed as a way an organization wants one to act or behave (Canary & Jennings 2007). Since implementation ethics is being taught more in college classes, and the reason for this is because of the huge scandals that have occurred. One study showed that the key leadership roles in a company often have a MBA, so teaching ethics will reach those leaders, and possibly prevent future ethical dilemmas (Sulivan, D. 2010).
Since auditors are not responsible for the actual financial statements, only the authenticity of them, as you stated, the more
The auditor is expected to give a qualified opinion in relation to the financial statements of the company. They are supposed to disclose any fraud and who the individuals are committing the fraud. Ernst & Young specific warnings about fraud in the Health Source and failed to bring it to light they was professional negligence on their
My three-years of studying at HKU afforded me with the knowledge of financial accounting and now, as a senior, I am able to consolidate complex financial statements. However, after spending an internship working with auditors, I begin to realize the many potential pitfalls inherent in the auditor/client relationship. Facing a huge amount of pressure from their clients, who, of course, are paying the bills, auditors who should be independent commonly bend the rules to curry favor with clients and
Auditors having the appropriate competence and capabilities to perform the audit, and follow ethical requirements, and maintain professional skepticism throughout the audit.
Integrity – Accountants should always ensure that they are honest and straightforward in their activities with every instance that they have clients. They should always maintain the lines of duty and maintain business relationships during all official duties (Nobes, 2015).
If accounting firms audit their clients, it should has a group of team work together for the audit client. Every work should get reviewed by the high level accountants. Because Anderson did not response due professional care, they failed to discover the problems in the Enron’s financial statements.