Bundy Service Station Ltd. Auditing Assignment Sample

Subject Name : Auditing

Code of Ethics

The threats and the actions that Bean and Associates should take as per APES 110 Code of Ethics are as follows:-

Threats

Action

Familiarity threat:

Senior partner of Bean & Associates, Doug Bean maintains a close relationship with its auditing client Bundy and seems to be too sympathetic towards the interests of the company. Such familiarity is crucially affecting the independence of the current auditor, Josh Bean, the son of Doug.

Earlier father Doug Bean used to provide both auditing and consultancy services, now son Josh Bean provides auditing services while Doug continues to provide consultancy services

Since Josh & his father are both considered to be close family in the auditing relationship between Bundy Service Station Ltd, they can help each other with maximizing the financial interests of the firm by overlooking crucial components.

The firm partner’s must not engage in providing multiple services to the same client to avoid conflict of interest and maintain confidentiality.

The current auditor Josh Bean should scrutinize the relationship that his father is maintaining with the company while acting as an active partner of the firm.

Josh must disengage himself from providing auditing services to Bundy if the other partner (his father) continues to maintain familiarity with the company.

Self-interest threat:

Bean & Associates is providing multiple services including auditing to Bundy Service Station Ltd since its incorporation. It is also providing advisory and taxation services to the firm.

Doug Bean has been the external auditor of Bundy since its incorporation; later Josh (Doug’s son) replaced him since 2014, while the auditing firm remains the same. Simultaneously Doug is also providing other than auditing services to the company. Such activities are creating conflict of interest because the auditing firm can hide the material misrepresentations while conducting audit of the client in order to gain financial advantage.

The firm is required to change its auditing team which include Josh & Doug because they are close family members.

The relationship can threaten the independence. Therefore the auditing firm needs to more professional & impose strict ethical regulations.

Intimidation threat

Bundy Service Station Ltd. is getting its accounting services done by its financial accountants & advisors & according to Jenna are not following the IFRS regulations that are to be adopted by every firm in preparation of financial statements, recording of transactions & payroll components.

The auditing firm is required to provide proper evidences as to why the company should follow the domestic GAAP (or AASB) instead of IFRS and why IFRS was not recommended previously.

The firm is also required to implement a more compliant corporate governance system within the company & ensure that all tax regulations & internal auditing is taken care of by the company.

Jenna despite of applying her utmost professional judgement based on her skills and knowledge as a qualified professional Chartered Accountant (CA) and training from Doug Bean, the current auditor of Bundy and partner at Bean & Associates, has violated the professional conductance as per ethical code, which are discussed below:

Integrity: Jenna is not the external auditor of the company and has not been associated with the company at any level except she is the wife of Mac, the director and the Chief Financial Officer of the company. However, she has been making allegations of mismanagement which could not be proved.
Objectivity: Jenna made allegations on Bean & associates for unprofessionalism but was not able to prove any of them. On the other hand she herself wants to conduct both auditing and consulting services for Bundy at the same time. Such activities can create conflicts of interests and shows unprofessionalism of Jenna. This point concludes that Jenna is under violation of the code of ethics as there will create conflict of interest and challenges auditor’s independence.
Professional Competence

Jenna has attained utmost knowledge & skills and is a qualified chartered accountant. Also she got trained by the auditor of Bundy, Doug Bean; therefore she has the knowledge that the company is not following IFRS to prepare its financial statements.

Confidentiality

Jenna has not maintained the confidentiality as she has gained crucial information as a trainee at Bean & Associates and as the wife of Director and CFO of Bundy. Also, she made false allegations on Bean as she could not prove them right and tried to acquire Bean’s business.

Professional Behavior

Jenna has not maintained professional behavior. If she identified some error in the activities of Bean & Associates, she must not have directly made allegations without arranging valid proofs. Also, she misused her husband’s special position as a interesting partner in Bundy.

Kevin, the trainee accountant at Bean & Associates has violated the professional conduct as per APES 110 Code of Ethics for Professional Accountants and breaks the terms of confidentiality that he has with Bean & Associates. It is important to note that Kevin is not an employee at Bundy, but is working with the current auditor of the company.

Kevin discussed a business deal with Ms June Clarkson, the representative of the Cougar Services. The business deal is conducted between Bundy and Cougar. Apart from that, Kevin has personal relation with Ms June Clarkson, which can cause threats of familiarity or self-interest for the firm (Bean & Associates).

Also, Kevin personally knows Ms June Clarkson, which can cause threats of familiarity or self-interest for the firm (Bean & Associates). It is possible that Kevin & Clarkson indulge in some illicit activities that aim at serving their self- interests. Overall, Kevin must possibly be seeking some financial interest from Bundy if the deals get successfully closed. The other ethical factor that Kevin breached is the threat of confidentiality because he might have shared some material confidential information with Clarkson.

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