Perceived Independence And Audit Litigation -Myassignmenthelp.Com

Question: Discuss About The Perceived Independence And Audit Litigation? Answer: Introducation APES 110 Code of Ethics for Professional Accountants, Section 130 states that the auditors need consider the limitation of the audit profession while making their clients. It implies that the auditors do not have any right to make false promises to their clients. In this situation, Berowra Accountants do not have the right to provide advertise for guarantee tax refund as tax refund is not in their hands. Thus, Berowra Accountants have violated the principle of Professional Competence and Due Care (Houghton and Campbell 2013). APES 110 Professional Appointment, Section 210 states that the auditors are needed to determine that whether their new contract has negative effects on the fundamental principles of audit profession or not. The nature of athletic clubs is not-for-profit societies. As per APES 110, the auditors will violate no auditing fundamental principles for holding any position of not-for-profit societies (William Jr, Glover and Prawitt 2016). In addition, the port in local athletic club will not affect the audit operations of Jamie Harvey in large corporations. Thus, no ethical principle is violated in this situation. As per APES 110 Principle of Objectivity, Section 120 states there should not be any compromise in the audit opinion or judgment due to any kind of biasness, conflict of interest or any other influence. In the provided situation, it can be seen that Monlec Ltd might want favorable audit opinion by make the payment dependent on audit opinion. Thus, in case Pymble Accountants provides favorable audit opinion, they will violate the Principle of Objectivity (Houghton and Campbell 2013). According to APES 110 Principles of Confidentiality, Section 140, the auditors are professionally obliged for maintaining the confidentiality of obtained information of audit client while providing professional services to them. Thus, in this situation, Winton Accountants have violated the Confidentiality principle of audit profession (William Jr, Glover and Prawitt 2016). APES 110, Self-review Threat, Section 100.12 states that the audit member are not allowed for using the results of previous audit opinion developed by another audit member in the same audit team. In this situation, Thornleigh Accountants are intending to include Jane Davis for the audit operation in Jenkins Ltd due to her knowledge about the internal matter of the company. Thus, this action has revoked Self-interest Threat of auditing (Wright and Capps 2012). APES 110, Intimidation Threat, Section 200.8 states that the auditors are not required to accept any kind of accounting papers from the audit client as the auditors can feel pressurized to deliver favorable audit opinion. The auditors need to find conclusive evidences from their own. In this situation, in case John Darrow accepts the papers from Winmalee Ltd, they will Intimidation Threat of audit principles (Schmidt 2012). According to APES 110, Self-interest Threat, Section 100.12, the auditors should not have any kind of financial or non-financial interest in the audit client as it can affect the fairness of audit opinion. In the provided situation, the auditors get invitation from the chocolate company to visit their plant and social club. Thus, in case, the auditors accept the invitation, there will be a Self-interest Threat of auditors independence (Wright and Capps 2012). In the provided situation, it can be seen that the debt position of the company is weak as the company is facing major difficulties in repaying their debts and the bank needs repayment of their loans. However, the auditors have not found any material misstatements in the financial statements of the company. It indicates that there is not any manipulation in the financial statements of the company. Thus, the auditors will issue Unqualified audit opinion (Rahimania, Tavakolnia and Karamlou 2014). From the provided situation, it can be seen that the effects of not changing the inventory valuation method from LIFO to FIFO has material effects on the inventory of the company. However, apart from inventory, the auditors of the company have not found material misstatements in other portions of the financial statements. For this reason, the auditors will issues Qualified audit opinion along with a separate paragraph stating the reasons for not-being the unqualified audit opinion (Foroghi and Shahshahani 2012). Companies needs to do the valuation of their factory and plants in order to minimize the gap between carrying value and fair market value. In the provided situation, it can be seen that the directors of Victorian Manufacturing Company believe that there the market value of Melbourne factory has not changed over the five years. In case the assumption of directors is wrong, it can have major material effects on the audit process. Thus, due to lack of audit evidence, the auditors will issues Disclaimer audit opinion (Foroghi and Shahshahani 2012). References Foroghi, D. and Shahshahani, A.M., 2012. Audit firm size and going-concern reporting accuracy.Interdisciplinary Journal of Contemporary Research in Business,3(9), pp.1093-1098. Houghton, K. and Campbell, T., 2013.Ethics and auditing(p. 354). ANU Press. RAHIMIAN, N., TAVAKOLNIA, E. and KARAMLOU, M., 2014. Qualified Audit Opinion and Debt Maturity Structure. Schmidt, J.J., 2012. Perceived auditor independence and audit litigation: The role of nonaudit services fees.The Accounting Review,87(3), pp.1033-1065. William Jr, M., Glover, S. and Prawitt, D., 2016.Auditing and assurance services: A systematic approach. McGraw-Hill Education. Wright, M.K. and Capps, C.J., 2012. Auditor independence and internal information systems audit quality.Business Studies Journal,4(2), pp.63-84.