Jane Smith is an auditor with APMG, a national audit firm. She is currently working on the

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Question:

Jane Smith is an auditor with APMG, a national audit firm. She is currently working on the annualaudit of the fnancial report of Orange Pty Ltd (Orange), a transport company. While undertaking thepreliminary assessment of internal controls, Jane became aware that Orange was using an information system that had been purchased from her previous employer, Add Right Pty Ltd (AddRight).

When Jane gave her evaluation of Orange's internal controls to her manager, Derek White, Derekstated that he was surprised at how quickly Jane had completed the task. He said, "we did well to hireyou, in all my years as a registered company auditor, I have never seen an evaluation of internal controls completed so quickly." Jane replied that the reason she was able to undertake the evaluationso quickly was that she was very familiar with Orange's information system because she had played aleading role in designing it at Add Right. Derek responded to Jane's statement by saying that it wasabout time he had a bit of luck because the audit was behind schedule and Orange's CEO had expressed displeasure at the prospect of a late audit report. He added that the Managing Partner ofAPMG had told him that because Orange was such a large client, APMG could experience financialdifficulties if Orange decided to use a different auditor.

Required:

On the basis of the facts provided above, and your understanding of the Code of Ethics forProfessional Accountants, answer the following questions:

(а) Identify three ethical issues that may impact the audit of Orange

(b) Explain why each of the issues identifed in (а) above is of concern.