PROFESSIONAL AND ETHICAL PRACTICE

PROFESSIONAL AND ETHICAL PRACTICE (20 MARKS) 

(a) Write a response indicating any erroneous assumptions made in the following statement 
(5 Marks) 
“Auditing neither creates goods nor adds utility to existing goods and therefore does not 
add value to business. Auditing exists only because it has been legally mandated”. 

Read the case facts below and answer the questions that follow: 

Brenda George, a CA, is in charge of the 20X8 audit of Portland Ltd, a listed company. A PhD 
economic researcher conducting a study on the financial operations of firms in the same industry 
as Portland asked Brenda to contribute her views on the financial operations of Portland. The 
economist promised to keep confidential any information received from Brenda. 

(b) Explain what course of action Brenda should follow in order to discharge her professional 
and ethical responsibilities when disclosing information about her audit client to the 
economist. (5 marks) 

Also, during the 20X8 audit of Portland Ltd, Brenda was asked by management to conduct a 
feasibility study to advise management of the best way the company may utilise an IT system 
that meets the company’s requirements. Brenda is technically competent in this area and 
accepted the engagement. Upon completion of the study, the company accepted her suggestions 
and installed the IT system she recommended. 

(c) What is meant by “independence” as applied to the chartered accountant’s function of 
auditing and expressing opinion on financial statements? Discuss. (3 marks) 

(d) Discuss the effect of Brenda accepting the management services engagement (if any) upon 
her independence in expressing an audit opinion on the financial statements of Portland Ltd. 
(7 Marks)