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PROFESSIONAL ETHICS INDEPENDENCE AND AUDIT QUALITY

Review Questions:

3.11 How does an ethic apply to auditors?

3.12 Identify the five types of ethical threats to professional independence and give a specific example of each.

3.14 Describe what is meant by independence in mind and independence in appearance.

3.21 Explain to Brenda the importance of professionalism.

3.23 Explain the ethical issues and recognize how they might be ignored.

3.30 Explain the ethical issues involved here.

Recommend a course of action for Noreen.


Comprehension questions:

3. The reasons might an entity provide for adopting sustainable development.

4. Identification what information entities are likely to provide if they use sustainability reporting.

5. Explain the difference between sustainability reporting and traditional financial reporting.

7. What is international integrated reporting and how does it differ from the current financial reporting system they have?

8. What is the Global Reporting Initiative, and what is its purpose?

22.1 Sustainability reporting.

22.1 The impact on financial reporting.



Answer

Review Questions

3.11 How does an ethic apply to auditors?

The system of ethics defines the opinions and prospects leading the manners of persons and associations in the behavior of interior auditing. This explains the least amount of conditions for manner, and behavioral prospects to a certain extent than exact actions. The communal work ethics audit is procedures considered on the way to assist the social workers evaluate the ethical problems methodically and expansively (MacKinnon, 2017). The perception of the ethics audit is constant with social work's continuing exertions to defend customers and others from damage. The auditors have got the result in the reliability disaster for the occupation, triggering public enquiries into the issues of the occupation in universal.

3.12 Identify the five types of ethical threats to professional independence and give a specific example of each

Self interest threat

This threat is basically called a disagreement of importance that might incorrectly manipulate the judgment or behavior.

Self review threat

This threat is for the principle of the person when he is essential to assess the outcomes of a earlier judgment or service.

Advocacy threat

This threat can arise in the time of supporting a situation or judgment to the position which the person’s following impartiality is cooperated.

Familiarity threat

When a person becomes concerned to the interests of additional like a outcome of a secure relationship, which his/her proficient result becomes cooperated.

Intimidation threat

This threat comes from the situation when a person is prevented from performing impartially through genuine or supposed pressure or manipulate.

3.14 Describe what is meant by independence in mind and independence in appearance

Independence in mind is the position of mind that allows the condition of a judgment without being precious through manipulates that cooperate proficient judgment, permitting a person to perform with reliability, and implement objectivity and proficient cynicism. Independence in mind may be evaluated applying the rational person assessment, where independence in form is supported on exact preventions and rules.

3.21 Explain to Brenda the importance of professionalism

The professionalism in place of work activities is important for the long phrase achievement of a industry, whether this is a huge business or little company. The worker communications and associations with consumers are of much significance to make sure those business aims and goals are met. The person who explains the thought and deference for others reveals an assurance to professionalism. Similarly, an individual who stays his or her statement shows faithfulness, and beats hopes is signifying professionalism. Some main components show the professional manner.

3.23 Explain the ethical issues and recognize how they might be ignored

The ethical issues are such kind of difficulty or condition which involves an individual or association to prefer among options which should be assessed as ethical or unethical. The ethical issues are formed in different ways,

Fundamental issues

The most primary or necessary ethical issues that the businesses have to face are honesty and faith (Brady, 2017).

Diversity issues

The ethical answer to diversity starts with employing a diverse employee’s implements equivalent scope in every training program.

The ethical issues might be ignored through the vital perceptive of honesty contains the thought of performing the business matters of the person with truthfulness and a assurance to treating all consumer comparatively.

3.30

Explain the ethical issues involved here.

The ethical issues are situations where the all people need to create a option from unclear and difficult alternatives where every alternative may be the right choice according to the exact moral condition of point of view (Baer & Nagy, 2017). This decision-making ethical issue is the method of resolve that engages a careful assessment of facts and principles.

Recommend a course of action for Noreen.

It is recommended that though Noreen Parke and Tony Young has been working together for three years still they need to be independent while making annual audit report for the pharmaceutical company. As per the auditor’s independence, an auditor should be independent from the company for which it is making the reports. By doing this, the report made should be bias free and will provide an honest professional opinion about the financial statements to the shareholders. Noreen being an independent auditor is an certified accountant or chartered accountant who are being appointed by the client company for examining the financial records and the transactions done in the business and provide its annual audit report.


Comprehension questions

3. The reasons might an entity provide for adopting sustainable development.

The sustainability is important as it includes various factors such as maintaining the quality of the environment.  This factor aims in developing clean and healthy communities for the welfare of the individual residing in it. One of the reason that might an entity provide for adopting sustainable development is as follows:

Valuation services

Valuation services refer to the services performed by the independent auditor for the audit client. The auditing process includes making assumptions about the developments to be done in the future. It should also be noted that an audit firm should not provide any valuation services to an audit client when the audit client is an entity of the public interest.

4. Identification what information entities are likely to provide if they use sustainability reporting.

The information that an entity will be providing if they use sustainable reporting is as follows:

a)In case that the audit client is an public interest entity, the firm should not perform any internal audit service which relate to specific factors controlling the internalfunctioning over the financial reporting done.

b) The amounts of disclosure or the system of financial accounting ,which are aggregate and are material to the financial statements are the factors on which the firms will be able to express its opinions.

5. Explain the difference between sustainability reporting and traditional financial reporting.

The difference between sustainability financial reporting and traditional financial reporting are as follows:

Sustainability reporting in accounting refers to the accounting, which is associated with the social environmental accounting, non-financial reporting and corporate social responsibility reporting. Whereas, Traditional financial reporting in accounting refers to the obtaining, analyzing of the company’s financial position as per their performance within certain period (Global Reporting Initiative, & Global Reporting Initiative, 2014).

Traditional financial reporting provides information about the investments done, procedures of the financial activities done and related with the cash flows. On the other hand, sustainability financial reporting in accounting provides information about the strategies used by the organization, performance done, governance and the factors, which will lead to the development of the small and medium companies.

7. What is international integrated reporting and how does it differ from the current financial reporting system they have?

International integrated reporting follows refers to the global coalition of the investors, regulators standard setters, NGOs and the presence of accounting professionals. The big and medium sized companies adopt international integrated reporting (De Villiers, Rinaldi & Unerman, 2014). The companies required to appoint an auditor who will provide the company’s annual report.However, the current financial reporting differs from the international integrated reporting as they are practiced in the small sized firms and they are not able to appoint an independent auditor for making their financial auditor’s report. 

8. What is the Global Reporting Initiative, and what is its purpose?

The global initiative and purpose of  reporting refers to the mission proposed by the Clinton to turn his ideas into action. His ideas convened global and the emerging leaders for creating and implementing solutions to the world’s most pressing charges (Bendell, 2017). The global initiative reporting standards is the first global standards for providing sustainability reporting.

22.1 Sustainability reporting

Explain what the accountant means by a ‘carbon footprint appearing on the statement of financial position’, and whether this ‘footprint’ would be visible to investors.

According to the manager of the Exmouth Ltd, he does not consider to adopt the necessary to new changes in the operations done by the company. He is not convinced of the scientific evidence, which cause climatic change. However, he said that if the company does not decrease its greenhouse gas emissions the carbon footprint would be appearing on the statement of the financial position after the implementation of the carbon emissions trading scheme.

22.1 The impact on financial reporting

The financial statements may have a radical effect on the store price of the company. The investors repeatedly make use of financial ratios based on information from the financial declarations to create statements. Because of these things, the financial statements may have an extreme consequence on the investors of a production.



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