Ethical Requirements Of APES110

pages Pages: 4word Words: 890

Question :

Code: ACC305


The following situations may or may not breach the ethical requirements of APES 110.
You need to state whether they are or are not a breach of the ethical requirements of APES110 and if they are a breach of the ethical requirements state which ethical principle has been breached :

(a) The Mortdale Accounting firm had carried out several audits of public companies in the last year. It now provided the working papers to the Penshurst Accountants who were carrying out a peer review of the audits by Mortdale Accounting. The Mortdale Accounting firm does not advise its clients of these reviews.

(b) Jan Dungog, a CPA, applies to a local public accounting firm of Chartered Accountants, for a position ,but asks the local public accounting firm not to contact her current employer. The local public accounting firm do not contact her contact her current employer but hire her without contacting them or her other referees.

(c) Wendal Sailor, a chartered accountant, acquires an insurance and superannuation business as well as conducting audits. During audits Wendal Sailor frequently contacts the firms during the audit advising them of their other services prior to providing their final Audit Opinion.

(d) Judith Durham is the partner on an audit of a not for profit charitable organisation. She is also a member of the Board of Directors but this position is honorary and does not involve her performing
any management function.

(e) Ernie Dengate sells his accounting practice which includes bookkeeping, tax and auditing. He obtains permission for the release of tax working papers but does not request permission for the others. He releases all the working papers from these functions to the new accountant, Jago, who has
bought the practice.

(f) Fred Nerk, a public accountant in a small country town, provides tax services, management advisory services and does audits for the same clients. Sometimes the same person provides all these

(g)The Allgood Chartered Accounting firm maintains its records on various computers in its office. It does audits on the Branch Company and the Branch Company has found its computer facilities are inadequate for its needs and so the Allgood Chartered Accounting firm has maintained certain of the
accounting records of Branch Company on its computers.

(h)James Jameson, a public accountant, stays too long at the annual Christmas party of his firm, the Balgowlah Accountants and consumes too much alcohol and drugs. He subsequently goes into town and is involved in a fight and is charged with assault on a person at a hotel as well as drunken and disorderly behaviour when he attempts to drive off. He is subsequently convicted and sentenced to 3 month in gaol as well as having his license suspended for 1 year.      


(a) The auditor was unable to obtain confirmations from eight  of the client’s major customers that
were included in the sample however the auditor was able to satisfy himself about the balances of these accounts using other audit procedures.

(b)The client restricted the auditor from carrying out procedures  to verifythe  property ,plant and equipment .The property, plant and equipment comprises 35% of total assets..

(c) Management have excluded from the financial report the necessary disclosures in relation to
a contingent liability .If this becomes an actual liability it will have a material effect on the financial
report when it becomes an actual liability.

(d) A significant proportion of a retailer’s sales are made on a cash basis but the internal controls are inadequate and the value of these cannot be verified . There are no audit tests that can be done to assure yourself that cash sales are being recorded or are correct

(e)You have been asked to do the audit for a new client this financial year .While you are satisfied that there appears to be no material misstatements for the information during the current financial year the client will not provide any information about the opening balances of accounts at the start of the financial year.

(f) You have just started auditing the financial statements of a client which has not been following the Australian Accounting Standards since it began operating four years ago.  

(g) A client has been using the LIFO method of accounting for inventory which is disallowed under
the Australian Accounting Standards. This has had a material effect on the financial statements
however its effect is currently limited to the effect on the Inventory value

(h) The auditor of Numark has just completed the audit and is satisfied that there are no material misstatements however the client’s continuation as a going concern is in extreme doubt as its major
customer has gone into liquidation and it appears very unlikely that other customers will take its place due to the highly specialised nature of its products.  

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Answer :


The code of the ethics provides the exact areas in which the entire ethical aspects are carried out in a field of professional accounting. Accounting Professional and Ethical Standards Board  (APESB) provides the independent body that has been established in the year of 2006 with the better form of initiatives in the country of Australia and Chartered Accountant in New Zealand. The main role of the APESB provides the development and solving out of all the professional problems with the ethical standards related to the public interest, which can be applied to the members of CPA Australia. The main aim of this assignment is to enhance the ethical principle regarding the various happened situation in the Accounting firms. There includes with various opinions that might be expressed on the caused situation for the appropriate reasons.

Question 1 

a. As per the evaluation of the provided scenario, the Mortdale Accounting Firm has aligned with the accounting codes of ethics. As far as APES 110 is concerned, it primarily emphasizes on maintaining the fundamental principles along with the integrity, objectivity and related codes of ethics (Doxey et al, 2016). As it is evident from the provided scenario, Mortdale Accounting Firm is liable to not disclose the peer review to the customers or any other third party. Section 140 that indicates the code of Confidentiality requires from the firms to respect the confidentiality of the information which has been acquired as a result of professional and business relationships. The peer review can be considered as the information which they are liable to protect the confidentiality of. Therefore, aligning with the section this firm has not breached the codes of ethics.

b. The mentioned scenario, Jan Dungog who has applied to a local public firm of accounting, has deliberately forbidden the current employer to contact the previous firm she used to work for. As far as professional behaviour is concerned, this behaviour clearly indicates breach of the codes of ethics. The section 130 and section 140 defines the professional codes of ethics in APES 110 (Kinney Jr, 2015). Here, Jan Dungog, has breached the section 130 of professional competence and due care as this section clearly states that it is the right of an employer to have professional knowledge in order to ensure proper services from the employee. Here, along with this section, she has also breached section 140 that indicates compliance with the laws and regulations in order to avoid any discredit regarding her profession.

c. Wendel Sailor who besides being a chartered accountant also acquires an insurance and superannuation. As per the section 230, that defines compliance regarding second opinion, section 230.2 and 230.3 has been breached in this case as Wendel sailor has frequently contacted more than one accountant for their final audit opinion.

d. As per section 210.6 the fundamental principle of professional competence and due care has the liability and imposes the needful over the subjected person regarding few obligations on a member of public Practice (Glover, Taylor, and Wu, 2017). Here, Judith Durham besides being partner on an audit of a NGO also enjoys a post in the Board of Directors of the company. But as this post does not involve her performing any management function, it is not the breach of her duty.

Question 2

a. In the happened situation, there lies with the auditor that was unable to get a sort of confirmations regarding the major customers of the clients. The auditor has provided various samples to satisfy the demand of the consumers with the better auditing procedures regarding the entire auditing procedures. The opinion regarding the auditor procedures lies with the certification of different financial statements that have been arisen on the opinion of the accountant with the records and procedures, which help to process that can satisfy the existing clients. The unqualified opinion needs to be delivered by the auditors among the clients to deliver a better procedure to provide the clean report. This helps to satisfy the clients regarding the entire auditing procedures (Glover et al. 2017). 

b. The client has provided a restriction on the auditor to carry out a better procedure at the time of verifying the important equipment that includes with the plant and property assets of 35%. The disclaimer opinion can able to help the happened situation between client and auditor. As the auditor might not able to render the opinion as the entire circumstances are beyond the control. The client has completely restricted on the important equipment on the assets provided. This opinion helps to resolve the restrictions issues caused by the clients.

c. The contingency liability provides the potential liability for the occurrences that depends upon the outcome on the future happened situation. It is recorded as the accounting records in the organization to estimate the number of liabilities. The main opinion exists with the transformation of the actual liability in the bonds payable areas. The contingency liability becomes the actual liability that enhances the materials effects and helps on the future services (Rus et al. 2016). 

d. There is a high risk of the manipulated accounting and there lies with chances of liquidity risk in the investment cost. There is no particular auditing test has been carried out by the retailer at the time of carrying out the entire business. The retail sales become a major problem on the internal controls that enhance the better managing of the entire cash, which makes the major opinion regarding the caused situation.   

e. The auditing on the new clients on the financial year might arise with the material misstatements in the financial statements. In this situation, the main opinions exist with the process that the auditors need to report down the entire auditing reports of the inappropriate assets displayed.There is a high chance of auditing risk which the auditor expresses with the opinion in the financial statements. The quality of disclosure of the account is very low that shows the entire financial statements, which don’t give the fair and true value of the firm (Kinney, 2015).  

f. The entire financial statements of the clients have been followed properly by the Australian Accounting Standards. The opinions exist with the correct or evaluating form regarding the Accounting Standards that have been used by the organization. Then implying this accounting standard on the board that has been operated four years ago. 

g. The client has been using the method of LIFO in the accounting areas for the inventory that disallowed Australian Accounting Standards. The main opinion exists with the clients that don’t follow the proper Accounting Standards of Australia. It produces the misstatements in the financial report that will not give the value or true areas in the inventory control (Doxey et al. 2016). 

h. The auditor in the Numark has completed the entire process of auditing which has arise with the financial misstatements with the client continuation. It might rise with certain doubt on the liquidation that has been raised upon the customers. The opinions exist with the focusing on the entire liquidity to control the entire operational activity carried by the firm with the followed Accounting Standards (Weirich and Reinstein, 2014). 


It is concluded that the auditing firm needs to focus on the Accounting Standards carried by the Australian country. There are following various types of opinion and ethical requirements as per APES 110 on different accounting firms.