Auditing Assignment

Question 1 (15 marks)

A.

The audit partner has just advised you that he has been approached to accept the appointment of auditor to Games Limited. Games Limited is a manufacturer of gaming machines and has been named in a recent anti-corruption enquiry as having offered incentives to state government members to support a proposed bill which would allow an increased number of gaming machines in licensed premises. No charges have yet been laid against Gaming Limiteds or any of its employees. The audit partner explains to you that Games Limiteds auditors were re-appointed for the current financial year at the Annual General Meeting held two months ago. However, Games Limited managing director is unhappy with the existing auditing firm as the audit partner assigned to Games Limited has been changed.

Required:

The audit partner is unsure whether he should accept the appointment and has asked you to outline any ethical, legal and other factors to be considered in his decision about whether to accept the appointment for the current year, and to indicate the steps that need to be taken prior to the appointment. (5 marks)

B.

Mitchell is part of an audit team who has been sent to Mexico to conduct an audit of one of their clients subsidiary companies. During the audit Mitchell uncovers a series of bribes that the company has paid to local authorities. Bribes are considered a normal part of business in this particular city so the subsidiary company feels as though they have done nothing wrong. Mitchell thinks of herself as an honest person and is trying to decide what is ethically appropriate.

Required:

Determine what decision Mitchell will make regarding whether or not she will report the bribes by applying ethical theories of teleology and deontology. (5 marks)

C.

China and Chong, accountants, were employed for several years by Bulls Co. Ltd to make annual audits. As a result of a change in control, in company discontinued the engagement of Chin and Chong and retained another firm of accountants. Bulls Co. thereupon demanded that Chin and Chong surrender all working papers they had prepared in undertaking audits for the company.

Required:

Chin and Chong refused on the grounds that the working papers were their property. The company brought legal action to recover the working papers. Should it succeed? State briefly what the law is, in general, as to ownership of auditors working papers. (5 marks)

Note

1. include references APA method.