Audit Accounting OZ Assignment Help

Audit Accounting OZ Assignment Help

Audit Accounting OZ Assignment Help

Question1:

Introduction:

In accounting environment, Auditing is a crucial practice. Improper auditing can cost in legal complexity and liability issues. Therefore, auditing should aim lowering the above-mentioned costs. Instead of proper professional care the auditors may face difficulties from the actions of clients, investor and third parties. In this business report, the situation of Jimmy ford is discussed in the legal environment introducing Ford as the account manager of F&M accounts. Jimmy’s difficulty in determining the questionable method type of EI opens a contradiction between Jimmy and his senior audit partner. So, this business report tries to find some solution for Jimmy with the help of ‘code of ethics’ and AAA model.

Situation:

Jimmy Ford is an experience auditor in the F&M accounts. According to the firm, they have plans to make him audit partner due to his expertise. Jimmy has an active social life as a member of various clubs and has vision of bright future. Lately, the F&M accounts assigned him the audit of one of their biggest client EI. Per ASIC, EI’s revenue recognition method has some difficulties which can raise legal questions. Checking the whole situation Jimmy reported EI’s method as questionable (Howieson et al, 2014). The situation become difficult when Jimmy’s senior audit partner contradicts Jimmy’s audit conclusion. Per the senior partner EI is using this method for nearly 10 years therefore the method is appropriate. Moreover, the senior partner thinks that EI may stop working with F&M accounts if they question the method. Jimmy tried to use some logic telling the senior partner that matters have changed after ASIC investigation in the present. He also suggested inclusion of a dissenting statement while changing his conclusion following the senior partner. But the senior audit partner was no longer interested in working with him.

Solution:

According to the code of ethics of professional accountants, the first important thing is following the international standard (Waldron et al, 2017). In this case ASIC, has already questioned the method of EI that means there are loop and holes in the revenue recognition method. The fundamental principle indicates that professional accountants should acting in public interests which means public interest comes before the individual client satisfaction (Branson et al, 2015). Per the four parts of this fundamental principle the professional accountant must demonstrate the threats (if any) to safeguard the public interests and third parties (if any). Moreover, the terms integrity, confidentiality and objectivity indicate that Jimmy should stay honest, not-biased and maintain confidentiality of business information. Moreover, Jimmy has to consider the acceptable level and all types of threats following the code of ethics (Triyuwono, 2015). Another important help can be the AAA model. The seven steps of decision making can help Jimmy determine difficulties in ethical issues.  The complete solution for Jimmy’s problem is given in the following tabular format:

American Accounting Association Model

Decision making process

1. Determine the facts

The facts are:

1.EI’s revenue recognition method is questionable per ASIC

2.EI is one of the largest client of F&M accounts

3.Jimmy tried to include ASIC decisions in his audit report

4.Senior audit partner contradicts jimmy with two points:

5.1) method is on for 10 years which means that is appropriate

5. 2) questioning EI can cost F&M accounts

2. Define the ethical issues

 The ethical issues are:

1.Action against public interest: senior audit partner is trying to satisfy EI as client (Brouard et al, 2016)

2.Lack of integrity: Senior audit partner is not completely honest while taking decisions

3.Lack of objectivity: Senior audit partner is trying to be biased considering the method as appropriate while ASIC questions the said

4.Lack of professional behaviour: Senior audit partner’s action discredits the profession (Brown et al, 2017)

5.Introducing self-interest threat:EI’s interest influence Senior auditor’s decision

6.Introducing advocacy threat: client’s position influence the objectivity

7.Introducing intimidating threat: being strong client EI creates active pressure on audit report

3. Identify the major principles, rules and values

 In this case the major principles are the fundamental principles, conceptual framework and threats and safeguards

Rules: Corporate governance regulations, professional standards, regulatory monitoring and external review (Mintz, 2014)

Values: public interests, professional accountant standards and ethical requirements

4. Specify the alternatives

 Using fundamental principles Jimmy can try ethical resolution techniques following the professional accountant standard. If he follows the senior auditor report then he may add his proposed dissenting statement in the report (Flood, 2014). He can also try some third-party report to verify his conclusion. To maintain a non-biased and confidential report Jimmy may consult the BOD or the whole audit committee. In case the internal audit committee cannot resolve the issue, Jimmy may take the help of some legal advisor or ICAEW.

5. Compare values and alternatives

 If the public interest according to fundamental concept is used, then F&M accounts may lose its influential client but using third party view like ICAEW/ external legal advisor can put EI in a difficult condition. Again, if the integrity is maintained Jimmy cannot use misleading statement which means going against senior audit partner (Gloverand Prawitt, 2014). Therefore, safeguarding the threats means maintaining professional competence.

6. Assess the consequences

 If Jimmy, try an inactive position then he can follow the senior audit partner’s policy. That means going against the professional standard of AAA model and code of ethics. Again, going against senior auditor means losing the audit job (Bobek et al, 2015).

7. Make your decision

 Per ethical conflict resolution policy of ‘code of ethics’ if all the possibilities are not useful then the auditor can reject the association. But that is the extreme decision. Therefore, Jimmy can try external legal committee/ ICAEW to verify his decision.

Conclusion:

According to the case study, Jimmy the auditor of F&M accounts faces conflicts while taking professional decision. The major problem is senior audit partner’s lack of integrity and objectivity which intimidating Jimmy’s audit report. EI’s influence as major client creates conflict between senior audit partner and Jimmy. In this situation, Jimmy, can take help of ‘code of ethics’ and AAA model to solve the problem. The senior auditor lacks professional standards as per fundamental and conceptual framework of code of ethics. Therefore, to maintain fundamental principles Jimmy should take help of external legal advisor/ICAEW.

Audit Accounting OZ Assignment Help

References:

Bobek, D.D., Hageman, A.M. and Radtke, R.R., 2015. The effects of professional role, decision context, and gender on the ethical decision making of public accounting professionals. Behavioral Research in Accounting, 27(1), pp.55-78.

Branson, L., Chen, L. and Anderson, L., 2015. THE IMPLEMENTATION OF INTERNATIONAL CODES OF ETHICS AMONG PROFESSIONAL ACCOUNTANTS: DO NATIONAL CULTURAL DIFFERENCES MATTER?. International Journal Of Business & Public Administration, 12(1).

Brouard, F., Bujaki, M., Durocher, S. and Neilson, L.C., 2016. Professional Accountants’ Identity Formation: An Integrative Framework. Journal of Business Ethics, pp.1-14.

Brown, J.O., Hays, J. and Stuebs, M., 2017. Modeling Accountant Whistleblowing Intentions: Applying the Theory of Planned Behavior and the Fraud Triangle. Accounting and the Public Interest.

Flood, B., 2014. The case for change in accounting education. The Routledge companion to accounting education, p.81.

Glover, S.M. and Prawitt, D.F., 2014. Enhancing auditor professional skepticism: The professional skepticism continuum. Current Issues in Auditing, 8(2), pp.P1-P10.

Howieson, B., Hancock, P., Segal, N., Kavanagh, M., Tempone, I. and Kent, J., 2014. Who should teach what? Australian perceptions of the roles of universities and practice in the education of professional accountants. Journal of Accounting Education, 32(3), pp.259-275.

Mintz, S., 2014. Accounting for the public interest. Perspectives on accountability, professionalism and role in society.

Triyuwono, I., 2015. Awakening the conscience inside: the spirituality of code of ethics for professional accountants. Procedia-Social and Behavioral Sciences, 172, pp.254-261.

Waldron, M., Waldron, M., Fisher, R. and Fisher, R., 2017. Values and ethical judgments: The adequacy of students as surrogates for professional accountants. Meditari Accountancy Research, 25(1), pp.37-64.

Question2:

Introduction:

Professional accounting standard is dependent on three basic laws and they are contract, statutory and common law. The contract law determines the auditing standard considering major liabilities. The statutory law is based on financial statement as well as corporation law. Finally, the common law indicates the basic duties and liabilities of the auditors. Considering these three legal rules the concept of duty is introduced in the legal environment. Therefore, breaching duties means negligence which can make the clients take legal action against the auditor/legal advisor. In this business report, as an external auditor of Plummet travel the auditor tries to find out his position with the help of basic case laws and auditing standards.

Situation:

The external auditor of Plummet travel Ltd is the legal advisor of Kingsley read. The travels Ltd is popular for their promotional tour in New Zealand and chain of shops. The travel Ltd is listed in the ASX for 10 years and the external auditor is auditing the company for 10 years. According to the external advisor the travel Ltd is facing cash difficulties for nearly three years. Moreover, the travel Ltd has no long-term loans and bank overdraft is due in the end of this financial year. In this financial year, the travel Ltd has upgraded its accounting system digitally. The problem is that the external advisor is not well-versed with digital system/database (Simon et al, 2014). The company hired consultant to convert files digitally in the system. In the end of the financial year the director report indicates that the travel company is happy with the digital operation which is working for six months. The external advisor takes help of an independent expert to review the operation of database management system. Per the expert, the digital conversion is correct and the system is reliable. In BOD meeting, the external advisor received news that the parent company is considering 70% of the Plummet’s share as the travel company’s profitability is low (Simunic et al, 2017). However, the parent company acts after receiving the financial statement of the audit report (via external auditor). In the meantime, errors are discovered in the digital system and the parent company is accusing the external advisor for negligence.

Solution:

According to the legal environment three basic laws are considered here. Moreover, the legal concept of liability tries to find out answers for three important questions (Porter et al, 2014). The questions are:

If Kingsley read failed to exercise ‘due care’ in external auditing

If Plummet travel is guilty of negligence (Knecheland Salterio, 2016)

and If Kingsley read needs to provide duty of care to the parent company

Exercising due care: Per accounting standard ‘due care’ means the effort of the reasonable party to avoid difficulties considering legal circumstances. The major terms are: judgement, care, determination as well as activity. First of all, the new digitised system was major problem for the external auditor (Chan, 2016). Therefore, he was dependent on an independent expert’s view about file conversion and system operation. So, the term duty is overlooked in this case. Per ‘due care’ concept the auditor should have done some background check on the system as he has valid reason of low profitability (travel Ltd). Again, the corporate law indicates that final report of audit must be done after intensive investigation which is obviously not done in this case (Gifford and Robinette, 2014). Therefore, Kingsley read failed to exercise ‘due care/diligence’ in external auditing.

Contributory negligence: Acting prudently is the basic feature of avoiding contributory negligence. According to legal concept, negligence is unintentional and careless conduct which may cause serious damage. But the concept of common law defines another term called contributory negligence (De Mot, 2013). In this case if the neglected party get difficulties for some personal reason then other party is not liable for the damaged caused. Again, the concept of ‘liability to clients’ indicates that this kind of negligence includes inappropriate supervision and review, improper documentation and internal controls, lack of warning and action against management and suspicion etc. In this case, Plummet travel shows lack of management, control as well as improper review and supervision (Cusimanoand Roberts, 2016). Therefore, per common law and statutory law they are guilty of contributory negligence.

Duty of care: Kingsley Read is the external advisor of Plummet Ltd which also makes them the external advisor of the parent company. Usually, the auditors are not aware of the users of their report /financial statements. That means the external auditor was not aware of the parent company using his financial statement for their offer. The concept of ‘liability to the third parties’ indicates that financial statements are majorly useful for the potential investors. Therefore, parent company of Plummet Ltd definitely can use the financial statements of the Kingsley read. Per special relationship the external advisor is responsible for the action taken by the third party following his audit report (Foleyand Christensen, 2016). In this case, the third party is the parent company and the external advisor is the legal advisor of Kingsley read. That means Kingsley read should provide duty of care to the parent company. Again, the term ‘reasonable foreseeability’ determines that the parent company is included in the class of persons who should be aware of the audit report. Considering the concept of this term Kingsley read has breached the duty of care for the parent company which cause them the damage of $0.40 per share. Finally, the proximity between the auditor and the third party (the parent company) indicates that financial statements in the audit report make the third party take some serious actions (Cassel, 2016). The dependence on external auditor is due to his long term working with the travel Ltd.

Conclusion:

In this business report the external advisor of Plummet travel Ltd is seeking three important answers with the help of case laws and auditing standards. Therefore, three major laws are used and legal terms are considered to get the solution of given problem. Kingsley read’s legal advisor’s final audit report for Plummet travels make the parent company take some action with negative output. Taking the help of common law, corporate law and terms like proximity, due care, liability thereare contributory negligence and breaching of ‘duty of care’. The corporate law also proves that Kingsley read has breached ‘due care’ for Plummet Travel Ltd.

References:

Cassel, D., 2016. Outlining the Case for a Common Law Duty of Care of Business to Exercise Human Rights Due Diligence. Business and Human Rights Journal, 1(02), pp.179-202.

Chan, G.K., 2016. Finding Common Law Duty of Care from Statutory Duties: All within the Anns Framework.

Cusimano, G.S. and Roberts, M.L., 2016. Contributory Negligence and Assumption of Risk. Alabama Tort Law, 1.

De Mot, J., 2013. Comparative versus contributory negligence: A comparison of the litigation expenditures. International Review of Law and Economics, 33, pp.54-61.

Foley, M. and Christensen, M., 2016. Negligence and the Duty of Care: A Case Study Discussion. Singapore Nursing Journal, 43(1).

Gifford, D.G. and Robinette, C.J., 2014. Apportioning liability in Maryland tort cases: Time to end contributory negligence and joint and several liability.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: assurance and risk. Routledge.

Porter, B., Simon, J. and Hatherly, D., 2014. Principles of external auditing. John Wiley & Sons.

Simon, A., Yaya, L.H.P., Karapetrovic, S. and Casadesús, M., 2014. An empirical analysis of the integration of internal and external management system audits. Journal of Cleaner Production, 66, pp.499-506.

Simunic, D.A., Ye, M. and Zhang, P., 2017. The joint effects of multiple legal system characteristics on auditing standards and auditor behavior. Contemporary Accounting Research, 34(1), pp.7-38.