The Audit Services Of Simtec Ltd Essay

Question:

Discuss about the Audit services of Simtec Ltd.

Answer:

Non-violation

The principle of objectivity needs the professional to be unbiased in the opinion or a conflict of interest should not arise or the opinion should not be influenced by any situation. It implies that the decision should be independent without falling under any undue influence (Church et. al, 2008).

The Audit services of Simtec Ltd was managed by the Gordan Accountants from July 7th to 2nd September 2016 and it was stated by Simtec that the final payment will be based upon the receipt of the final report. If the terms and condition of the client are agreed upon by the Gordan Accountant then it would have been a violation of the principle of objectivity because then it would have been an undue influence from the client.

Non violation

As per the ethical principle of the professional behavior, it must be ensured by the professional that the necessary regulations must comply any activity that tarnishes the image of the profession must be avoided.

In this scenario, David Dale is a local accountant and is asked by the Insurance Company to share the details of the client and even offered a 5% commission for every new client. In this case, if David accepts the condition laid down by the Insurance Company then it will be a huge disrespect to the Insurance Company as a professional is not expected to accept any commission from an outside body. Therefore, if David accepts the terms and conditions then it will breach the professional conduct and bring disrespect (Elder et.al, 2010).

Self-Review Threat

It is a threat that happens when a work or a judgment is required to be ascertained by the person who did that work. In this case, Ellen Davis is appointed as a Senior Account Manager for a span of 4 years in Jenkins Ltd, the firm Thornleigh Accountants appointed for the purpose of the audit. If there is an inclusion of Ellen in the audit team then it is a self-review threat because she has already been a part of this particular client firm and is well acquainted with all the facts and figures (Matthew, 2015). Further, she would not change the facts and figures and the review that has already been submitted. Hence, it will lead to a pre-defined action that will spoil the very nature of the process of accounting.

Self-Interest threat

In the provided case, John Dargin the audit manager has taken receipt of the accounts from the client Winmalee Ltd. In such accounts, the company has treated the expenditure development as a capital expenditure and did not include in intangible assets. The client has even provided details that were acquired and were sympathetic in their approach while doing the assets valuation. The preparation of reports has been done by the senior staff that has an interest in the profits scenario of the company (Gay & Simnet, 2015). The auditor is provided with all the relevant details by the client company that can show the treatment of development expenditure is correct. It can be best described as a self-interest threat as the auditor has a fear that he will lose the client if all the points are not met as per the client’s specification.

References

Church, B, Davis, S & McCracken, S 2008, ‘The auditor’s reporting model: A literature overview and research synthesis’, Accounting Horizons vol. 22, no. 1, pp. 69-90.

Elder, J. R, Beasley S. M.& Arens A. A 2010, Auditing and Assurance Services, Person Education, New Jersey: USA

Gay, G & Simnet, R 2015, Auditing and Assurance Services, McGraw Hill

Matthew S. E 2015, ‘ Does Internal Audit Function Quality Deter Management Misconduct?’, The Accounting Review, vol. 90, no. 2, pp. 495-52

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