James works as an auditor in KS Chia & Partners and are planning the audit of Syntactic
Question:
James works as an auditor in KS Chia & Partners and are planning the audit of Syntactic Berhad. The principal activities of Syntactic Berhad is manufacturing plastic products in Malaysia. KS Chia & Partners has audited Syntactic Berhad since 2017 and James have served as auditor during that time.
Based on his preliminary discussion with the board of directors of Syntactic Berhad, the following information has been gathered.
- Syntactic Berhad is trying to have its shares listed on a reputable stock market. The board of directors has formed an audit committee, as mandated by corporate governance standards, but no further action has been done. The listing's details aren't yet available to the public.
- James has been requested to keep preparing the company's financial accounts in the same manner as in prior years. familiarity threat
- Syntactic Berhad would request him and his audit partner to attend an evening gathering in a hotel where Syntactic Berhad will present its listing plans to banks and current shareholders. familiarity threat
- Syntactic Berhad has informed that the fee for taxation services given in the year ended December 31, 2020 would be paid immediately after the company's taxes liability has been agreed upon by the taxing authorities. James have been advising Syntactic Berhad on the validity of certain things as 'allowable' for taxes purposes, which is argued by the taxation authorities.
- James has just realised that you are going to inherit about 5% of Syntactic Berhad’s share capital as an inheritance on the death of a distant relative.
Identify and explain FIVE ethical threats which may affect the independence of KS Chia & Partners’ audit of Syntactic Berhad. For each issue, suggest a recommendation to mitigate the risk to an acceptable level.
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston