Audit Opinion Improvement and Timing of Disclosure

Question: Discuss about the Audit Opinion Improvement and Timing of Disclosure. Answer: Introduction: In this case, accountant has accepted different work related to different field of same client. Professional accountant is doing bookkeeping, preparing tax return for same client and involved in providing many other management services to same client. In this case, there is violation of accountant code of ethics of conflict of interest. Conflict of interest is the code of ethics under which accountant becomes bias in providing true and fair state of business affairs of client. When auditor accepts many works of same client then he / she is not able to provide correct results. Objectivity is the ethical principle that has been violated in this case, which deals with providing unbiased opinion. In this case, David Smith has referred ten clients of insurance company, Allied Insurance, without the permission of respective clients. In this case, it is assumed that accountant, David Smith, has not charged any commission from insurance company at the time of lending names and afterwards. Then in this case, there is no violation of any accountants code of ethics (Arnold et al., 2013). As there is no such advertisement or soliciting new clients and any other misconduct in this case. On the other hand, there is no violation of ethical principles also. In this case, Wrench and company has maintained records of clients in single system or computer which is used for office purpose and by clients also. Sometimes Wrench and company arranges staff from audit department to input data in the system for clients. Afterwards that audit staff can be involved in audit procedure of same client. In this case, Wrench and company is providing indirect book keeping services and this will raise conflict of interest within Wrench and company. Since same audit member is required to audit the client for whom he / she has prepared books of accounts. Objectivity ethical principle will be violated in this case. In this case, Stephanie Barry, accountant of Williams Pty Ltd, has sent her firms literature related to management services that she provides on monthly basis. This act is in practice without any request from Williams Pty Ltd or unsolicited. Stephanie Barry has been violating the accountant code of ethics of marketing of professional services. In section 250 of APES 11- code of ethics for professional accountant, marketing of professional services is prohibited. Accordingly, accountants are not allowed to market their services or capabilities to clients or any other person unsolicited. In this case, principle of professional behaviour has been violated (Branson et al., 2015). Katrina Ng has been acting in dual capacity in not for profit organisation i.e. Katrina Ng is accountant and involve in board of directors of not for profit organisation. According to Section 220 of APES 11- code of ethics for professional accountant, accountant or auditor of the business organisation cannot act in any other capacity in that particular business organisation. Therefore, there is violation of conflict of interest accountant code of ethics. Conflict of interest restricts accountant to follow all compliance test and bate to hide irregularities in business organisation (Zakaria et al., 2010). In this case, integrity and objectivity are two ethical principles that have been affected. Peter Beattie is a public accountant and has been providing many services like provides tax services, management advisory services, bookkeeping services and conduct audit of the same client. In this case, there will be conflict of interest because single accountant is involved in auditing and many other management services of same client. Section 220 suggests that accountant of business organisation will not in prudent manner if many services are accepted of same client. Accountant is required to reduce threats of biasness that creates conflict of interest while providing auditing and assurance services (Kung and Huang, 2013). In this case, ethical principle of integrity and objectivity has been violated. In this case, auditor or accountant has been advertising in local newspaper with colourful pictures and disclosing other details like staff, comparing with other auditors and claiming to help in getting highest tax deductions. Section 250 marketing professional services of accountant code of ethics suggests that accountant shall not engaged in making exaggerated claims regarding service and experience that auditor provides. Accountant shall be comparing their work with other auditors. In present case, auditor has violated provisions of section 250 and therefore violated the code of ethics of marketing professional services (Jeffrey, 2013). In this case, ethical principle of professional behaviour has been violated. In this case, David Cheadle is the auditor of Nestree Ltd, who has started audit of current year. Audit fees of the previous year is still due, despite of this fact, David Cheadle has started audit of current year. In this case, there is possibility of arising self interest conflict of David Cheadle in terms of non payment of fees. But in this case there is no violation of any accountant code of ethics or any ethical principles (Martinov-Bennie and Pflugrath, 2009). Auditor is not able obtain some information from the clients major customers that are included in its sample. But afterwards he / she is able to perform some other audit procedure to satisfy about correctness of balances of customers accounts. It can be concluded that auditor is satisfied and there is no misrepresentation regarding account balances. So in this case, auditor shall issue unqualified audit opinion. Unqualified audit opinion is the opinion under which there is no misrepresentation in financial statements and client has followed all related standards while preparing financial statements. There are some powers that auditor posses with themselves while providing audit and assurance services to client. These powers are fundamental powers and client cannot restrict them accordingly. In this case, client has restricted auditor to examine property, plant and equipment. Property, plant and equipment is the significant part of total assets which comprise of 20 % of total assets and this will be significant part to form audit opinion. Although it can be assumed that there is no misrepresentation in financial statements and financial statements are prepared and presented according to accounting standards. But in this case, auditor shall issue disclaimer of opinion as he / she is restricted to perform audit procedures (Tahinakis and Samarinas, 2016). Australian accounting standards are to be followed by each and every business entity while preparing financial statements in Australia. If any business entity failed to do so then financial statements of the entity will be considered defective and misrepresented for stakeholders. Auditors are required to ensure that business entity has followed Australian accounting standards in preparing and presenting financial statements. In this case, since management has failed to disclosure contingent liability with financial statements then in this case auditor shall express qualified opinion. Qualified opinion shall be issued in this case, since financial statements of client are not presented according to Australian accounting standards but there is no material misrepresentation. First and foremost requirement for preparing financial statements is records of transactions that business entity is required to maintain. Same is the case with the auditing the financial statements i.e. without sufficient and appropriate records of transaction, auditing is not possible. In this case, since there is no or inadequate sales records are maintained that is not sufficient to express opinion on financial statements (Adiloglu and Vuran, 2011). There shall be audit trail in complete transactions which is required to conduct audit of financial statements. In this case, auditor shall express disclaimer of opinion. As there is no basis on which auditor can satisfy regarding correctness of sales amount. There are some cases where two types audit opinion can be provided in a single audit report. In case where auditor is satisfy about everything including application of Australian accounting standards while preparing and presenting financial statements. In the provided case, there is neither misrepresentation in financial statement nor any material misstatement in financial statement is present. But management is not able to provide information related to opening balances and this has causes limitation on audit procedure. Therefore auditor is not able to examine or verify opinion balances and cannot comment on the same (Cullinan et al., 2012). In this case, auditor shall express two audit opinions i.e. for opining balances; disclaimer of opinion shall be issued and for remaining financial statements unqualified opinion shall be issued. Australian accounting standards are mandatory to be followed by all the business entity while preparing and presenting their financial statements. Australian accounting standards are those standards which standardise preparation and presentation of financial statements in Australia. In this case, client has not followed Australian accounting standards since beginning of its business operations. In this case, financial statements will reflect misrepresented information and there will be material misstatement. In this case, adverse opinion shall be expressed by auditor as there is no application of Australian accounting standards. According to Australian accounting standards business entity shall calculate amount or value inventory by using FIFO and weighted average method of calculating inventory amount. In this case, client has followed LIFO method for calculating inventory value. LIFO method is not allowed to be used under Australian accounting standards and value of inventory calculated using LIFO method will reflect misrepresentation of financial information. In this case, qualified opinion shall be issued including one paragraph for same. In this case, there is no material misrepresentation in financial statements of the client. According to auditor financial statements confirms with Australian accounting standards but there is one event that took place that raised question for going concern on client business. One major customer of client has faced liquidation which has affected the business of client also and questioned going concern (Feldmann and Read, 2013). In this case, auditor shall express disclaimer of opinion. References Adiloglu, B. Vuran, B. 2011, "A Multicriterion Decision Support Methodology For Audit Opinions: The Case Of Audit Reports Of Distressed Firms In Turkey", The International Business Economics Research Journal (Online), vol. 10, no. 12, pp. 37. Arnold, D.F., Dorminey, J.W., Neidermeyer, A.A. 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