Question

Task 1

It is important that an auditor should comply with fundamental principles and ethical behavior while accepting and conducting an audit. Explain fundamental principles and ethical conduct that auditors should always maintain with their clients.

Task 2

Why audit planning is an important audit function? Explain how Peter & Co is lagging in planning of the stated audits?

Task 3 Discuss the conduct of Mr. George in his profession as an auditor. State clearly whether he fulfilled the necessary qualities of being an auditor and explain what are the appropriate actions that the audit firm can take to safeguard and implement ethical conduct.

Task 4 Critically comment on Ms. Nancy’s acceptance of the bank audit and explain what are the necessary steps that should be taken before accepting an audit engagement.

Answer 1

The fundamental principles establish the standard of behavior expected of a professional accountant (PA) and it reflects the profession’s recognition of its public interest responsibility. These are Integrity, Objectivity, Professional Competence and Due Care, Confidentiality and Professional Behavior

Integrity: A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships.

Objectivity: A professional accountant shall comply with the principle of objectivity, which requires an accountant not to compromise professional or business judgment because of bias, conflict of interest or undue influence of others.

Professional Competence and Due Care: This requires accountant to

• Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation; and
• Act diligently and in accordance with applicable technical and professional standards.

Confidentiality: A professional accountant shall maintain utmost confidentiality of information acquired as a result of professional and business relationships. He shall not disclose such information unless there is a legal or professional duty or right to disclose such information.

Professional Behavior: A professional accountant shall comply with the principle of professional behavior, which requires an accountant to comply with relevant laws and regulations and avoid any conduct that the accountant knows or should know might discredit the profession. A professional accountant shall not knowingly engage in any business, occupation or activity that impairs or might impair the integrity, objectivity or good reputation of the profession, and as a result would be incompatible with the fundamental principles.

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