Audit, Assurance and Compliance Questions
a)Independent auditors are governed by a professional body and this body has regulations that ensure that independent auditors fulfill their responsibilities to their clients and the public in general through a professional code of ethics. At the work environment, having ethics means being able to deliver auditing services with skills and competence and with great knowledge in moral principles. Based on the case in question, it is evident that King & Queen audit firm has served Impulse Pty Ltd for a long time and this has turned their relationship from just being professional to casual and friendly. This is the major reason that could have prompted King & Queen audit firm to offer an incomplete audit report disguised as unqualified. The fact that King & Queen audit firm ignored valuation of assets of Impulse Pty Ltd shows incompetence and a lack of consideration for the general public. According to the professional code of ethics of external auditors, it is in their capacity to know that financial information is used by many stakeholders and not only the management of the firm.
Chapter 3 of Gay & Simnett, (2012), they assert of the importance of the golden rule of reciprocity which states that one should do unto others as he or she would have them to do. This rule is important since it emphasizes on the duty of care for others by ensuring that we only do good to others and not harm. This rule is well tailored with the principle of beneficence. Giving out incomplete financial report is not an act of duty of care since major decisions of a firm are done using audited financial report. Therefore, this means that King & Queen owes a duty of care to all the users of Impulse Pty Ltd financial information and thus they are liable to Easy Finance Limited (EFL). The virtue of an auditor is to act in the interest of the public and failure to that will amount to a liability to third parties. Third parties include all the other persons that will use the audit report apart from the client, such as; the government, the investors, credit providers, employees and the entire business community that rely on the integrity and the objectivity of the auditor. Based on the actions of King & Queen, they did not act in the interest of the public but only focused their duty on one party alone; Impulse Pty Ltd. Integrity is what guides the auditing fraternity since it means acting in honesty and giving true and fair reflection of the financial status of a firm, regardless of their relationship with an organization, they should be able to give clear and complete report. A lack of integrity on the part of King & Queen has been observed where they omitted relevant financial information, which ultimately mislead Easy Finance Limited into giving a large loan to Impulse Pty Ltd.
b) In case Easy …