APPENDIX A: ASSESSMENT COVER SHEET

ASSESSMENT COVER SHEET

Pheku
Surname
Amith
First Name/s
177214
Student Number
Introduction to Auditing
Subject
Formative Assessment 2
Assessment Number
Celumusa Mkhabela
Tutor’s Name
20 March 2023
Date Submitted
X
Submission () First Submission Resubmission
71 Brairdale Drive
Newlands West
Postal Address
Durban

4037
[email protected]
E-Mail
(Work)
(Home)
Contact Numbers
(0814376562)
Bachelor of Commerce in Accounting / July 2022 Semester 2
Course/Intake

Declaration: I hereby declare that the assignment submitted is an original piece of work produced by myself.

Signature: A Pheku Date: 20/03/2023

Contents
Title Page
Question 1…………………………………………………………………….1.2.3.4
Bibliography……………………………………………………………………….5
Question 1

Case 1
Adi has been suspected of financial irregularities which took place under his supervision, Adi
denied these allegations and later accepted when proof was made available. Adi then mentioned
that he was instructed to lie by his superiors.
Adi has failed to comply with the code of ethics and has engaged in professional misconduct. As
a Chartered Accountant Adi is expected to keep integrity and ethics at priority while performing
his duties, and such an event can bring disrepute to the Chartered Accountants institution.
The principle of integrity imposes an obligation on all chartered accountants to be
straightforward and honest in all professional and business relationships. Integrity implies fair
dealing and truthfulness.
Adi has also not complied the principles of objectivity, which imposes an obligation on all
chartered accountants not to compromise their professional or business judgment because of
bias, conflict of interest or the undue influence of others. Adi was easily influenced by his
superiors.
Threats identified through Adi’s unethical behavior were:
Self-interest – Adi’s superiors influenced his behavior or judgement which resulted in him
acting in the best interest of himself.
Intimidation threats – Adi stated that he was pressurized by his superiors to lie, He could have
been threatened with dismissal.

Case 2
The principle of objectivity imposes an obligation on all chartered accountants not to
compromise their professional or business judgment because of bias, conflict of interest or the
undue influence of others.
The principle of professional behavior imposes an obligation on all chartered accountants to
comply with relevant laws and regulations and avoid any conduct that the chartered accountant
knows or should know may discredit the profession.

1
Thando has violated the ethical principle of independence by attending a private dinner for the
financial director of a major client of the audit firm. Thando's close friendship with the financial
director may compromise his independence and objectivity, which are essential for the audit
process to be credible and reliable

Threats relating to such conduct:

Familiarity threats – which could arise from a personal nature that the accountant/auditor has
with others. E.g., gifts or special treatment. Objectivity is threatened as the professional
relationship which exist between the auditor and the client is threatened.

Case 3
The principle of objectivity imposes an obligation on all chartered accountants not to
compromise their professional or business judgment because of bias, conflict of interest or the
undue influence of others. A chartered accountant may be exposed to situations that may impair
objectivity. It is impracticable to define and prescribe all such situations. A chartered accountant
shall not perform a professional service if a circumstance or relationship biases or unduly
influences the chartered accountant’s professional judgment with respect to that service.

Asanda has failed to comply with the objectivity principle, she seems to be gender biased as she
does not want to work with male counterparts. Asanda refuses to have any male members on her
audit team on grounds that all female workers are more professional and competent. This is a
threat based on self-interest that is motivated by her own judgment and opinion. Additionally, it
displays a failure on her part to exercise professional competence and due care. She is being
biased when employing in her department. The principles of the code of ethics on professional
behaviour imposes an obligation on all chartered accountants to comply with relevant laws and
regulations and avoid any conduct that the chartered accountant knows or should know may
discredit the profession. Asanda failed on this principle due to her unprofessional behaviour and
not following relevant laws and regulations that governs Chartered Accountants.

2
Case 4
Preneshan has breached the essential principle of Integrity and professional competence and due
care, which imposes an obligation on all chartered accountants to be straightforward and honest
in all professional and business relationships and to act diligently in accordance with applicable
technical and professional standards when providing professional services. Integrity implies fair
dealing and truthfulness. By charging the customer for audit processes that he knew were not
really performed, Preneshan has violated the ethical principle of professional competence and
due care. This is a betrayal of trust and goes against the moral standard of professional
competence and due care.

Threats relating to such conduct:

Self-interest threats – Preneshan acted on his personal interests by charging the client a fee and
not providing the service.

Case 5
South African Institute of Chartered Accountants (SAICA) has issued a code of professional
conduct which needs to be followed by all accountants to maintain the highest level of
professionalism in the profession. The auditor should adhere to the principle of professional
competence and due care which requires that the audit should be completed within its due time
frame and there should not be undue influence by the principle of objectivity

The principle of objectivity imposes an obligation on all chartered accountants not to

compromise their professional or business judgment because of bias, conflict of interest or the
undue influence of others. The fact that the financial director offered a trip to the auditors should
the audit deadlines be met annually could compromise their independence as it may create a
perception of a conflict of interest and may affect their judgment when performing the audit.
This can easily compromise their objectivity and as a result could lead to errors in their reporting
just to meet the annual deadline. The basic principles of professional competence and due care
can pose a familiarity threat if auditors behave unethically.

3
Threats relating to such conduct:
Familiarity threats - Objectivity is threatened as the professional relationship which should
exist between the auditor and the client is threatened. The client and the auditor should always
maintain a professional relationship.

Case 6
Ben failed to comply with the code of ethics and has engaged in professional misconduct.
By accepting fees in cash without charging Vat and offering discounts to clients the auditor has
violated the fundamental principle of integrity which requires fair dealings with clients,
objectivity which requires no undue bias against any client, and the principle of professional
behavior which requires complying with all laws and rules and regulations. This behavior is
unethical and goes against the principles of professional behavior and integrity.

Threats relating to such conduct:

Self-interest threats – Ben is working in his own best interest because the cash payments would
benefit him and allow him to avoid paying taxes.

4
Bibliography

Auditing Notes for South African student’s 10th Edition – Jackson and Stent, LexisNexis
Publishers, 2019.