Ethical Requirements Of APES On Bookkeeping Firms

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Question :


QUESTION 1 (16 MARKS) 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) 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 .

(b) 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 services.

(c)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.

(d)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.

(e)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.

(f) 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 .

(g)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.

(h) 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.


Indicate the type of opinion that should be expressed in each of the following situations, providing reasons for your choice .

(a)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.

(b) 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.

(c) 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

(d) 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.

(e) 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.

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

(g) 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.

(h) 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.

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Answer :


The code of the morals gives the correct territories in which the whole moral angles are done in a field of expert bookkeeping. Bookkeeping Professional and Ethical Standards Board (APESB) gives the free body that has been built up in the time of 2006 with the better type of activities in the nation of Australia and Chartered Accountant in New Zealand. The primary job of the APESB gives the improvement and explaining out of all the expert issues with the moral benchmarks identified with people in general intrigue, which can be connected to the individuals from CPA Australia. The primary point of this task is to upgrade the moral standard with respect to the different happened circumstance in the Accounting firms. There incorporates with different assessments that may be communicated on the caused circumstance for the suitable reasons.

Question 1 

a. In this situation, Ernie Dengate sold his bookkeeping work on including accounting, assess and reviewing. Further he got the authorization for arrival of expense working papers however has not gotten the consent for other work, for example, accounting and evaluating and gave over every one of the archives to new bookkeeper. According to APES 110: Code of morals for expert bookkeepers, he has ruptured the standard of respectability, secrecy and objectivity according to segments 110, 120 and 140 of Part A: General Applications of code. Moving and sharing of data with authorization may make biasness and irreconcilable circumstance and he shared the data without explicit specialist and endorsements from customers. Along these lines, he has broken the moral prerequisites according to APES 110 (Chan, Cheng and Szeto, 2002)

b. Fred Nerk did not rupture the moral prerequisites of APES110. It is alright for him to offer diverse administrations to similar customers. The moral standards don't think about this as a rupture.

c. The All Good Chartered Accounting firm has broken the APES110 standards which expect it to have satisfactory offices. It has insufficient PCs to be utilized to store their records and this represents the peril of losing some vital data. This puts the fate of the firm in danger.

d. James Jameson has disregarded the business morals which require a community worker to carry on well. He takes part in battles amid the Christmas occasion and furthermore drives heedlessly. His conduct wasn't right and can't go on without serious consequences by a firm that is not kidding with its activity. The can demolish the two his notoriety for being admirably as that of the firm since he is considered as a minister of the bookkeeping firm.

e. As per the given depiction, it caan be found that the Accounting Firm of Mortdale has abided by the bookkeeping of ethics codes. As per the APES 100 codes of ethics, it can be seen that it strongly emphasises on going along with the essential standards of ethics codes. It is strongly based on the theme of objectivity (Doxey et al, 2016). On further study of the situation, the Accounting firm is in risk not to disclose the informal survey that it holds to the customers or clients. Field 140 that apparently shows the Confidentiality code, it requires the secrecy and privacu of information that has got procured owing to expert linkage in business. The companion audit can be looked after as the information that one needs to take care of in order to protect the confidentiality. We can finally come to the conclusion that  it has not breached the laws(Cezair, 2010).

f. As per the referenced scneario, Jan Dungog has been linked to a neighbourhood firm of bookkeeping; he has deliberately gone up against the present boss in order to connect to the previous firm that she used to be employed for. To the level of her professional behavior is concerned, this actually shows the breach of segmented laws. This goes along the section 130 as well as 140 that ias based upon expert codes of moral guided by the APES 110.  (Bazerman, Morgan, and Loewwenstein, 1997). In this case, the person has violated the 130 section that writes along the law of expert fitness and with due consideration, it can be also be expressed that the business also needs to have a considerable amount of information or proficient to ensure legitimate communication with the authoritative administration. She has also breached the section 140 that takes in due consideration the laws that asks to keep away from any damage to in regards to her response (Bazerman, Morgan, and Loewwenstein, 1997). 

g. Wendel Sailor who other than being a sanctioned bookkeeper additionally gets a protection and superannuation. According to the area 230, that characterizes consistence with respect to second assessment, segment 230.2 and 230.3 has been ruptured for this situation as Wendel mariner has every now and again reached more than one bookkeeper for their last review conclusion. 

h. According to area 210.6 the basic guideline of expert fitness and due consideration has the risk and forces the needful over the oppressed individual with respect to couple of commitments on an individual from open Practice (Glover, Taylor, and Wu, 2017). Here, Judith Durham other than being accomplice on a review of a NGO likewise appreciates a post in the Board of Directors of the organization. However, as this post does not include her playing out any administration work, it isn't the rupture of her obligation.

Question 2

a. In the fiscal reports, with the material errors, the inspecting on the fresh customers in the financial year may come out. The fundamental assessments exist that the examiners need to paper down the assessment reports in official manner of the wrong resources displayed in this circumstance. In the fiscal summaries, there is a a considerable shot of reviewing hazard with the feeling which the assesor communicates. We don't get a straightforward perspective of money related records. 

b. By the Australian Accounting Standards, the whole budget summaries have been submitted to of the customers. Concerning bookkeeping benchmarks, the conclusions exists with the right frame by the association. Four years prior, the suggesting this bookkeeping standard on the board. 

c. For the inventiory that disalloweed Australian Accounting Standards, in the bookkeeping region, the customer has been utilizing the technique for LIFO. With the clients,the fundamental conclusion that does not primarily fall under the Australian Accounting Standards, That creates the errors in the budgetary report (Campbell, Barry, Joe and Finney, 2008)

d. With the customer continuation, the customer of Numark has finished the total procedure of examining that has been arised with the misquotes . By pursued Accounting Standards, to control the whole movement, the analysis resides with a focus on the overall liquidity(Byrne, 1989)

e. In the given incident, it stays with the inspector who was not completely able to gain command of the significant clients. The inspector has depicted different scenarios and followed by examples that fulfill the needs and demands of the clients; this includes better inspection techniques of assessment. The conclusion (on behald of the assessment techniques) abodes by the confirmation of financial and budget reports and their confirmation. They have actually emerged as a result of bookkeeping records and methods. This further helps to process that can fulfill the clients' requirements. The unfit feeling should be brought into light the evaluators to the clients in order to focus on a better and improvised strategy to get the desired report. This takes into consideration the inspection systems, as a whole (Glover et al. 2017). 

f. A confinement has been delivered by the client to the inspector in order to perform a superior method at the season of inspecting the critical gear that takes into consideration the plant and property resources; it is of around 35 percent. The disclaimer supposition can be available to assist the circumstantial event between the inspector and the client. But, as the inspector is not ready to assist in order to render the supposition, the whole environment may appear to stay out of control. The client has limited ability and control on the vital gear on the given benefits.  Thye concluded conditions tend to settle the issues of confinement that take place on account of the clients. 

g.. The risk of possibility brings in the obligation that depends on the outcome of the happened event. It is concorded as bookkeeping records in the establishment in order to evaluate the liabilties' quantity. The fundamental evaluation presides with the alteration of real risk along with payable securities within territories. The possibility risk gets transformed into a genuine obkiged issue that improvises the impact opf materials and sustains on the future (Byrne, 2010).

h. There exists a high level of vulnerability when it comes to orthodox or controlled bookkeeping method; there stays oddity of liquidity in cost of venture. Besides, there is not test of introspection or inspection that is to be performed by the retailer at the session of accomplishment of the business or performing activities. The deals of retail gets transformed into a worthy issue that sees an upgradation considering supervision of the capital, taking into consideration the whole circumstance. 


It is presumed that the reviewing firm needs to concentrate on the Accounting Standards conveyed by the Australian nation. There are following different sorts of feeling and moral necessities according to APES 110 on various bookkeeping firms.