Auditing
Assignment 1
–
Auditing 300 (Semester 1/Trimester 1A, 2014)
You have just been employed as a junior auditor at the chartered accountant firm of SGT. Upon joining
the
firm;
the partners reque
sted that you review the firm’s audit clients to
ensure that the independence
requirements of APES 110 are being met
for the
financial year ending June 2013
.
Your review has revealed the following:
(a)
Sara Adnan, one of the senior
partners of SGT responsible for the
Sunrise Ltd’s
audit team
for the
finan
cial year ending June 2013
, recently came back from a 6 nights and 7 days cruise
with her
partner
. It w
as an expensive trip but she received
a
65% discount. The CEO of Sunrise Ltd
arranged this concession for her as a gesture of
his appreciation for a job
well done
.
(b)
Adam P
arker, is the current senior m
anager on the audit of Synergy T
echno Ltd. Synergy
special
izes in the production of electronic e
quipment and they have showrooms only in
Melbourne and NSW. Besides working for SGT
,
Adam also owns a
car showro
om in Perth (
a
family business). The business is not doing very well at the moment. After having a brief
conversation with
the
CEO of Synergy
,
he decided that he is going to dis
play and promote
Synergy’s equipment
here in WA. Adam has informed you that this is not going to be a problem
since he is just going to promote Synergy’s product
.
(c)
Leon Ziller
,
is
the current senior manager on the audit
team
of
TMG
Ltd
, the newest client of
SGT
. TMG
specializ
es in the produc
tion of mining equipment. Leon use
d to work for
TMG Ltd,
as one of their senior accountants. He left
TMG during the end of 2009
and joined SGT on March
2012.
(d)
Other than
the provision of
audit services
, SGT is also reputable
for
the quality of its
non
-
assurance services. The non
-
assurance service
department of SGT is highly regarded
because
they have several experienced and qualified members. S
GT’s strict policy does not allow
the
members of the non
-
assurance department to participate in any of the
ir assurance services. SGT
has been providing
Platinum Fabricators
Ltd, a listed company,
audi
t
services for the last 3 years.
T
his year SGT
has decided to provide
some bookkeeping services
as well
to
the
three
major
subsidiaries
of PF
L,
out of the four
subsidiaries.
(e)
Ashley Jonson, a senior auditor at SGT, has been on the audit team of Beximco
Ltd for a number
of years. Sh
e was recently thinking of buying a land outside Perth to build a summer
house and
she has already spoken to her
bank
ers
for loan. As
the
CFO of Beximco has known
Ashley for a
number of years now, he decided to help
Ashle
y by seeking the approval of the board in order for
Beximco to act as a
guarantor
for her
loan.
Required
For each of the independent situations above, and using the conceptual framework in APES 110,
answer the following questions.
1.
Identify potential threa
ts to independence & recommend safeguards to reduce the
independence threat
.
(5 marks)
2
.
Provide an objective assessment of whether audit independence can be achieved
.
(5 marks)
(
Total 10 M
arks)
