ACCT3000 AUDITING

_Assignment 1_semester 2, 2016

Write answers to each of the five (5) situations described below addressing the required criteria

(i.e. 1 &

2) in each independent case. You may use a tabulated format if helpful having ?Threats?,

?Safeguards? and ?Objective Assessment? as column headings.

Tom Hardy has been appointed as a junior auditor of Awesome Chartered Accountants (ACA).

One of his first

tasks is to review the firm?s audit clients to ensure that independence

requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His

review has revealed the following:

(a)

Sheraton Motels Ltd (SML)

is a chain of fifteen motels ope

rating in Western Australia.

ACA performs audit work for SML. This is the second year that ACA?s audit fee from

SML will comprise of around 17% of total ACA?s audit fee revenue.

(b)

Tech Grand Saver?s Ltd (TGS) has not paid any of its audit fees for the last

three years to

ACA, citing cash flow problems. This has resulted in a significant amount of overdue

audit fees for ACA. The audit partner in charge, John Wick has been reluctant to push the

issue further, as TGS is a high profile client who he wishes to r

etain.

(c)

For the past four years, ACA has been the auditor of Burswood Holiday Resorts Ltd.

(BHR). Brock Lesnar

CA

has been the audit partner responsible. To express sincerity

towards ACA and Brock, and to maintain the good relationship in anticipation of a

nother

smooth audit for 2016, BHR would like to present a complimentary 3

-

week holiday

package voucher for Brock?s Family to Hawaii. All expenses, including accommodation,

food, drink and travelling costs, will be paid by BHR.

(d)

While having a conversation

with Jeff Stallone, an audit senior at ACA, Tom learns that

Jeff is excited to have been allocated to this year?s audit team for Jumbo Independent

Groceries Pty Ltd (JIG)

(Please Note: JIG is not a Public Interest Entity).

Jeff was on a

temporary assignme

nt at JIG just a month ago, helping JIG with

tax & accounting

services. Jeff helped JIG with

its tax calculations and

preparing financial statements based

on information in the trial balance.

This work will be reflected in the 30 June 2016

financial report

. Jeff does not think there to be much audit work required around the tax

accounts and is confident for the audit to be highly efficient this year.

(e)

Bradley Cooper, an audit senior with ACA is very excited to be a part of the audit team of

Massive Metal L

td. (MM). Bradley feels that he will be a valuable asset to the audit team,

as his dad is MM?s financial controller who is responsible for the preparation of MM?s

financial report. Both Bradley and his dad are financially independent.

For each of the

independent situations above, and using the conceptual framework in APES 110

(Code of Ethics for Professional Accountants), answer the following questions:

1.

Identify potential threat

(

s

)

to independence & recommend safeguards

(

if any)

to

reduce the independence threat

(

s

) identified

.

(5 marks)

2.

Provide an objective assessment of whether audit independence can be achieved

(5 marks)

(Total 10 Marks)

ACCT3000 AUDITING_Assignment 1_semester 2, 2016 Write answers to each of the five (5) situations described below addressing the required criteria (i.e. 1 & 2) in each independent case. You may use a tabulated format if helpful having \"Threats\