Tutorial 2: Professional Ethics and Auditor's Legal Liability

Case 1: Ethical Issues

The following Involve Lola Payne, an audit semor with the A ccounting firm of Joyce & Mark She is involved with the audit of Dockland Fernes Ltd (Dockland) _ 2. 4. The assistant accountant of Dockland resigned 6 months ago and has not been replaced As a result, Dockland's transactions have not been recorded and the accounting records are not up to date To comply with the terms of a loan agreement, Dockland needs to prepare interim financial statements but cannot do so until the records are up to date. The managing director of Dockland wants Lola to help them out because she performed the audit last year. The audit partner of Joyce & Mark allows Dockland to use her for 1 month before the start of the annual audit _ During the annual audit of Dockland, Lola discovers Dockland had materially misstated profit after tax on the prelious year's tax return. The client is unwilling to take corrective action. Lola decides to inform the taxation offce_ On completion of fieldwork of the audit of Dockland, Lola is offered a six free ferry tickets by the managing director. He tells her this gesture is meant to show his appreciation of a job well done. Lola accepts the tickets. The panner of Joyce & Mark is not pleased with the time Dockland is taking to pay its audit fee for the year. He decides to take $5,000 out of a tmst tund that Joyce & Mark holds for Dockland. He intends to replace it as smn as the company pays its audit fees. Required For each of the previous four situations, identity the ethical issues involved, and discuss whether there has been any violation of ethical conduct. Suppolt nur answers by reference to the relevant professional statements.