PROBLEM CASE : GROUP 5 (DAT5B)
COMMERCE DEPARTMENT
DPA50153 - AUDIT 2
PROBLEM CASE(CLO 3)
PROGRAMME: DAT5B
SESSION:1 2021/2022
LECTURER: MRS JULIANA BINTI MOHD ARIFFIN
GROUP 5 (DAT5B)
1.
NURUL
NAZIHAH BINTI ABD WALID (10DAT19F1028)
2.
NURUL
SHUHADA BINTI MOHD SHARIFF
(10DAT19F1034)
3.
NURUL
ARDILLA BINTI ABD RAZAK (10DAT19F1022)
4.
NUR
DANIA NATASHA BINTI MOHD ILLIYAS (10DAT19F1059)
Introduction
Ø A code of ethics is a
comprehensive statement of the value and principles that guide the work of
auditors and accountant
Ø The independence,power and
responsibilities of auditors demand high ethical standards from them and their
audit work
Ø The code of ethics for
auditors considers the ethical and specific requirements of auditing work,
including their professional obligations.
Ø The code of ethics helps
accountants and auditors overcome ethical dilemmas, empowering them to make the
right choices and give a fair opinion of the financial statements that will
benefit the public.
Ø The MIA is responsible for
issuing pronouncements on auditing matters and has issued the By-Law for
accountants in Malaysia
Ø The five principle of
fundamental ethics are : Integrity,Objectivity,Competence and due
care,Confidentiality and professional behaviour.
Question 1
Eiman,
CPA, advertises in the local paper that his firm does the audit of 3 of the 21
largest banks in Malaysia. The advertisement also states that the average audit
fee, as a percentage of total assets for the banks he audits, is lower than any
other CPA firm’s in Malaysia.
Answer:
Confidentiality
(MIA Section 114) - Professional accountant must respect the confidentiality of
information obtained while carrying out professional service and shall not
disclose any such information to third parties without proper and specific
authorization from the client.
Our
opinion:
Eiman,CPA,
should not advertises in the local paper about his firm does the audit for 3 of
the 21 largest banks in Malaysia. Their Firm also should not states the average
of audit fee, as a percentage of total assets for the banks he audits, is lower
than any other CPA firm’s in Malaysia.
The
amount of fees must entering into negotiations regarding professional service
that means that price were obtain a consent from both the parties.The lower of
fees may be threats to compliance with the fundamental principles arising from
the level of fees quoted.
Question 2
Razwani,
CPA, sets up a small loan company specializing in loans to business executives
and small companies. Razwani does not spend much time in the business because
he spends full time with his CPA practice. No employees of Razwani’s CPA firm
are involved in the small loan company.
Answer:
Management
responsibilities involve controlling,leading and directing an entity,including
making decision regarding the acquisition,deployment and control of human,financial,technological,physical
and intangible resource.
Our
opinion:
Razwani
should spend much time in the business though he spends full time with his CPA
practice.Razwani’s CPA firm can involve their staff in the small loan company
but need to refer with their setting policies and strategic direction.
Question 3
Sofea,
CPA, owns a material amount of stock in a mutual fund investment company, which
in turn owns stock in Sofea’s largest audit client. Reading the investment
company’s most recent financial report, Sofea is surprised to learn that the
company’s ownership in his client has increased dramatically.
Answer:
Sofea,
CPA, owns a material amount of stock in a mutual fund investment company, which
in turn owns stock in Sofea's largest audit client, Reading the investment
company's most recent financial report, Sofea is surprised to learn that the
company's ownership in his client has increased dramatically
Section
400 Subsection
400.5 Independence is linked to the principles of objectivity and integrity.
Question 4
Daniel, CPA, owns a substantial limited partnership interest in an apartment
building. Amer Faez is a 100% owner in Taqwa Iman Bhd. Amer Faez also owns a
substantial interest in the same limited partnership as Daniel. Daniel does the
audit of Taqwa Iman Bhd.
Answer:
Based
on MIA By Law R510.4 subject to paragraph R510.5, a direct financial interest
or a material indirect financial interest in the audit client shall not be held
by:
The
firm or a network firm;
An
audit team member, or any of that individual’s immediate family;
Any
other partner in the office in which an engagement partner practices in
connection with the audit engagement, or any of that other partner’s immediate
family; or
Any
other partner or managerial employee who provides non-audit services to the
audit client, except for any whose involvement is minimal, or any of that
individual’s immediate family.
Question 5
Ubaidullah,
CPA, approaches a new audit client and tells the director that he has an idea
that could result in a substantial tax refund in the prior year’s tax return by
application of a technical provision in the tax law that the client had
overlooked. Ubaidullah adds that the fee will be 50% of the tax refund after it
has been resolved by the Inland Revenue Board Of Malaysia. The client agrees to
the proposal.
Answer:
Question 6
Alif,
CPA, does the audit, tax return, bookkeeping, and management services work for
Mukharith Construction Company. Mukharith follows the practice of calling Alif
before he makes any major business decision to determine the effect on her
company’s taxes and the financial statements. Alif attends continuing education
courses in the construction industry to make sure that he is technically
competent and knowledgeable about the industry. Alif normally attends board of
directors meetings and accompanies Mukharith when he is seeking loans.
Mukharith often jokingly introduces Alif with this statement, “I have my three
business partner my banker, the government, and my CPA, but Alif’s the only one
that is on my side.’’
Answer:
Based
on the code of ethics,subject to MIA by law section 113(a) Alif is a person
that practice code of ethics which is professional competence and due
care.Professional accountants should steps to ensure that those working in
professional capacity under their authority have appropriates training and
supervision.Based on this case, Alif
attends continuing education courses in the construction industry to
make sure that he is technically competent and knowledgeable about the
industry.
However,
the Threat of Self -Review exists if an auditor audits his or her own work or
work done by others in the same firm. it
can be seen in this case when AlIf Cpa conducts audits, tax returns,
bookkeeping and functional management services of mukharith construction companies. Issues By asking the auditor to review his or
her own work, the auditor cannot achieve financially unbiased income.
Conclusion
Our
conclusion is all the case that we discussed in the this slide all based on Mia By Law.The concept requires auditors
to carry out their work freely and in an objective manner. Auditor independence is commonly referred to
as the cornerstone of the auditing profession as it is the foundation of the
public's trust in the accounting profession.
Maintaining independence and ethics requires auditors to be mindful of
certain aspects in the client and auditor relationship. Auditors must be aware of and implement the
appropriate responses to conflict of interest situations. They must be diligent in identifying and
evaluating threats to independence and applying appropriate safeguards. When conducting an audit or review of a
financial report, auditors must provide a written declaration confirming that
there have been no contraventions of the auditor independence requirements or
applicable code of professional conduct.
References
1.
Oxford
Fajar (2017) . Fundamental of Auditing by Ayoib Chr Ahmad,Hasnah Haron, Mazrah
Malik,Zalailah Salleh, Hilwani Hariri,Norziaton Ismail Khan and Sherliza Puat
Nelson (Page 252 - 271)
3.
https://mypolyaudit.weebly.com/standard.html
4.
BY-LAWS
(ON PROFESSIONAL ETHICS, CONDUCT AND PRACTICE) OF THE (mia.org.my)
Thank You.
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