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9.CPC_Class exercises_26.09.2017 and 27.09.2017

The document outlines class exercises for the Auditing 201 module at the University of the Western Cape, focusing on the Code of Professional Conduct. It includes various scenarios involving potential violations of professional conduct by auditors and the necessary discussions and recommendations. The exercises aim to assess students' understanding of independence threats and ethical standards in auditing practices.

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9 views5 pages

9.CPC_Class exercises_26.09.2017 and 27.09.2017

The document outlines class exercises for the Auditing 201 module at the University of the Western Cape, focusing on the Code of Professional Conduct. It includes various scenarios involving potential violations of professional conduct by auditors and the necessary discussions and recommendations. The exercises aim to assess students' understanding of independence threats and ethical standards in auditing practices.

Uploaded by

popla popla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF THE WESTERN CAPE

DEPARTMENT OF ACCOUNTING

MODULE NAME : AUDITING 201 CODE: AUD 201

CLASS EXERCISES: 26 & 27 SEPTEMBER 2017

TOPIC: CODE OF PROFESSIONAL CONDUCT

Questions from Graded Questions on Auditing 2017

3.5 (15 marks)


3.7 (25 marks)
Additional questions from past papers
Attached

1
QUESTION 1 (10 marks)
Vic Clapham’s is an audit partner at Bean Counters Inc, the external auditors of
Runathon Ltd. Runathon is listed on the JSE and manufactures running shoes. As Vic
Clapham and Bill Rowan, the financial director of Runathon (Pty) Ltd, are both running
fanatics they have become close friends. As a result, Bill Rowan has arranged for
Runathon (Pty) Ltd to sponsor Vic Clapham at the Comrades marathon. The
sponsorship is for the next 3 years and covers all Vic Clapham’s travel and gear costs.
Required:
Discuss the threats to independence that may arise from the above situation in
compliance with the Code of Professional Conduct.
(AUD241 Term Test One 2014 – Adapted)

QUESTION 2 (16 marks)


1. An auditor was approached by one of their clients, an insurance broker,
requesting information about some of his other clients. The insurance broker
agreed to pay for the information plus commission for any successful sale that
will be made. Without hesitation, the auditor forwarded the information to the
insurance broker. (5)

2. A former accountant performed a review of internal controls over the


receivables cycle a few months after joining his former employer’s external
auditors as a trainee accountant. While at his former employer, he had also
provided advice with regards to EFT system for credit payments refunded to
customers. (5)

3. Joe Soap CA(SA) and head of the internal audit, was requested by the audit
committee to conduct an engagement on financial instruments as soon as
possible. The engagement will include review of accounting statements
including calculations; disclosures and controls to be put in place. They knew
that the internal audit team did not possess the knowledge necessary to
conduct such an engagement; however, the Joe Soap decided to commence
with the engagement. (6)
Required:

Identify possible violations to the SAICA Code of Professional Conduct in the above
scenarios.
i) State the rule of conduct and / or specific standard that is violated.
ii) Discuss the violation.
iii) Recommend the correct action.

(AUD241 Final Examination 2016 – Adapted)

2
QUESTION 3 (23 marks)
Patrick “Pitbull” Pieterse is one of three directors of E & U Inc. (“E & U”), a firm of
chartered accountants and registered auditors. The following describes some of his
actions in recent weeks:

(a) Patrick Pieterse instructed a trainee accountant, Sally Stander, to deliver a birthday
gift to Randolph Roux, the chief executive officer of an audit client, and to do so in
swimwear. When she protested, he replied, “Listen Babes, let’s get a few things
straight here. I appointed you because you’re pretty, so let’s use that prettiness of
yours to make an important client happy. And this is a really important client, by
far our biggest one, so you’d better do what I tell you to. You know we’ll be talking
salary increases soon, don’t you Babes?”

(b) Patrick Pieterse arranged for a notice to be added to E & U’s website. This notice
invited start-up businesses to sign up for three years of consulting and auditing
services with E & U. E & U will charge no fee for this three-year period in exchange
for a 10 per cent shareholding in the start-up business.

(c) One of Patrick Pieterse’s friends, Garth Groenewald, sent Patrick a mail, offering
him four audit clients that his (Garth’s) firm could not service due to the complexity
of the work, for a payment (to Garth Groenewald’s firm) of R50,000. Patrick
immediately replied to Garth’s mail and accepted the offer.

Required:

Comment, with reference to SAICA’s Code of Professional Conduct, on Patrick


Pieterse’s conduct as described above. Your answer should include relevant
safeguards that should have been implemented.

Mark allocation:
(a) 7 marks.
(b) 8 marks.
(c) 7 marks.
1 mark for communication/presentation.

(AUD236 Final Examination 2015)

3
QUESTION 4 (15 marks)

(1) Patrick “Pitbull” Pieterse is one of three directors of E & U Inc. (“E & U”), a firm of
registered auditors and chartered accountants. E&U is invited to set up a table at
UWC’s annual careers expo, on the day that is set aside for audit firms and
companies that offer traineeships. Patrick Pieterse mans the firm’s booth for the
day. When he gets to the venue, he attaches a number of cardboard arrows, with
words like “losers” and “cheapskates” printed on them, to the firm’s booth, with the
arrow heads pointing towards other booths. When a final year BCom (Accounting)
student approaches E&U’s booth, Patrick offers to pay him or her R200 in cash to
sign a traineeship contract with E&U, on the spot. Students who indicate that they
have already signed up with another firm are told that that is not a problem at all,
and that E&U would inform the other firm that the student had come to his or her
senses (as he puts it to those students). Patrick also sets up a powerful stereo
system and proceeds to play, at high volume, a hip-hop song with the title “It’s all
about that money”, which features crude lyrics. When approached by one of the
other exhibitors about his unconventional recruitment tactics, Patrick swears at the
other person, and also throws a stress ball at him.

(2) Dan Potgieter, who was a director of NOP Inc., a firm of registered auditors and
accountants, resigns from that firm to become the chief financial officer at Going
Places Ltd, one of NOP’s largest audit clients. Dan was the engagement partner
(partner in charge) of the Going Places audit before he left NOP.

(3) Mr Pugwash, a chartered accountant (SA), is a senior financial accountant


(reporting directly to the chief financial officer) at Cheap Cheap Ltd, a large retailing
company. He started working at Cheap Cheap during the 2015 financial year, so
he has not yet been awarded any share options or shares in the company. But
before he started working at the company, Mr Pugwash bought a substantial
number of shares in Cheap Cheap, which he still holds.

Required:

Discuss, with reference to relevant guidance in SAICA’s Code of Professional


Conduct, threats to compliance with the fundamental principles by:
(1) Patrick Pieterse.
(2) NOP Inc.
(3) Mr Pugwash.

4
Note: Your answers should include relevant safeguards that should have been
implemented.

Mark allocation:
(1) 5 marks.
(2) 5 marks.
(3) 4 marks.
1 mark for communication and presentation.

(AUD236 Supplementary Examination 2015)

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