Razman, the senior auditor of Rizal & Co., in charge of the financial statements auditof SuraHealth Sdn.Bhd. (SMSB) for the year ended 31 December 2020. SMSB isimportant to the firm as the company contributes about 30% of the firm’s total incomefor the assurance and non-assurance services. During the first meeting with themanagement, Razman was informed that the company has a tax dispute with theLembaga Hasil Dalam Negeri (LHDN). The management wanted Razman to jointhem in a meeting with the LHDN to settle the dispute and Razman agreed to attend.

On their first day at the client office, Ramli, one of the audit team members, toldthat his wife works as the accounting executive in SMSB. The manager of SMSBoffered Razman and his team a 20% discount for all products purchased from SMSB.This is special as the normal discount given to other customers is 10%. During theaudit, Razman found that the closing stock has been inappropriately valued andsuggested the correction to be made. However, the accountant of SMSB disagreedand warned that if the auditor does not accept his treatment, the company will notaward the information technology consultancy job which initially planned for theauditor.

Explain the ethical issues, the related threat and suggest any safeguard to reducethe threat to an acceptable level.

Answer rating: 100% (QA)

In our case the independence of the auditor has been compromised the accoun... View the full answer