APES 110 Code of Ethics for Professional Accountants. Assume

Question: Discuss about the Ethics for Professional Accountants Assume. Answer: Situation 1 It may seem that Section 120-1, APES 110 may be violated but on close scrutiny it becomes clear that there is not violation of the code. This is because it is highly likely that the two investors in the limited company may not be aware of each other. As a result, there is no conflict of interest since there seems be no relation between the business interest of Able and Marshall. Hence, Able can continue to provide audit services to Marshalls company without any loss of independence. Situation 2 As per the relevant details, Baker offers to the new client a proposal by which the taxpayer could pay a substantial amount of tax in the previous year tax filings. This aspect has been overlooked by the client but Baker demands a 50% of the total tax saving as fee for this which is agreed to the by the client. Clearly, the behaviour of Baker is in violation of professional behaviour in line with section 150. Additionally, it is imperative that the member must not be overly driven by fees which are being violated here as the model guidelines for fees charged for the services provided as highlighted in Section 240 of the APES ethics code are not being followed. The firm must have internal policies with regards to the fees specifying the maximum fee chargeable which would act as a safeguard in the given condition (APES, 2010). Situation 3 As per, Section 150-2, the members while marketing and promoting themselves must not make tall claims about the services and prices which cannot be verified. However, Contel releases an advertisement in the newspapers promoting the services offered by claiming that his firm is engaged with the largest 6-8 financial firms with regards to offering audit services and also makes claims about the average audit fee charged by the firm to be lowest in the city. Clearly, these claims can be verified objectively and assuming these claims are true, there is no violation of APES 110 code (APES, 2010). Situation 4 In order to avoid loss of objectivity and conflict of interest, it is advisable that public accountants do not engage in any particular business that does not go well with the professional services that they may offer. In the given case, even though Tan also has a loan business while offering professional services, but still there is no conflict of interest as Tan does spend any time with the loan business and also there is segregation of staff members (APES, 2010). Situation 5 Since Elbert has not realized that the mutual fund company in which she owns substantial shares has increased their investment in the largest audit client of hers, hence there would be threat to the independence of the auditor i.e.Elbert and thus leads to violation of 120-1 of APES ethics code. This is because there is a potent conflict on interest in the given case since during the audit if there are irregularities and Elbert gives a qualified remark in the audit report, then the stock price of the company would tumble which would have adverse effect on the valuation of Elberts share in the mutual fund company whose valuation would also go down. Thus, it is highly likely that Elbert in the given case would issue a unqualified audit report. Hence, Elbert should be required to make an undertaking that she does not have any direct or indirect ownership in the company to avoid the conflict of interest and hence act as a safeguard to prevent the situation from arising (APES, 2010). Situation 6 In the given situation, there is the threat of self review and familiarity in accordance with Section 200 of APES 110 code which tends to result in compromised actual independence. This is because Finigan is not only acting as the auditor but also as the offer book keeping services and tax return. Additionally, she seems to have a very close relation with the client which leads to the violation of Section 120-1 of the APES ethics code. In this case, there is a possibility that audit risk is high especially the detection risk since Finigan would audit the financial statements and other records prepared under her own guidance.In this regard, the audit firm should have a strict internal policy whereby the same person should not be responsible for providing both auditing and accounting services thus acting as a safeguard in such situations (APES, 2010). References APES (2010), APES 110 Code of Ethics for Professional Accountants, APESB Website, [Online] Available at https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf [Accessed April 27, 2017]