Purpose:
The purpose of this assignment is to assess student's capacity to provide an informed review of the fundamental principles of professional ethics and client acceptance decisions.
Question:
You are the audit manager of the audit firm Reliableaudits & Co, allocated to the audit of the companies described below.
You are required to prepare a business email addressed to the audit partner Ms Natalie Ticke with the email address of [email protected] to discuss the potential independence issues associated with the various companies.
Part A
For each of the following company situations your email should:
a. Review each company's situation and describe any potential threats, identifying the relevant section of the Professional Code of Ethics and;
b. Propose any recommendations to ‘safeguard' Reliableaudits & Co against the potential independence threats you may have identified.
1. Your audit firm has obtained a new audit client, Jatbulla Ltd. The company, a public interest entity has requested that your firm also prepares their income tax return and the calculations in respect of current and deferred tax liabilities/assets.
2. Your audit client Magpie Pty Ltd has requested that a junior staff member of the audit team be loaned to the client for a period of two weeks, to undertake some routine data input as a number of staff have taken parental leave. The audit staff member is familiar with the client's accounting systems.
3. Wil Wagtail has recently joined the audit team in a senior audit role. Upon his appointment he advised that his wife is a director of your audit client Parrot Ltd.
4. Galah Pty Ltd has an out dated manual payroll system. They have approached your firm to recommend a computerised replacement, as they feel that as the auditor you have a good understanding of their needs.
Part B
In addition to the discussion of the above issues, your audit partner has requested that you provide a brief summary of the function of an audit committee, explaining how an audit committee can help an auditor be more independent. Include the summary in the same email, using your own words with referencing of the source of your ideas; however, do not present the information as a large quote.
Learning Criteria: To categorise and communicate in a written form the factors to consider in the assessing independence issues and the application of APES110 and the Corporations Act.