Ethics and Conduct of accounting profession

The accountancy profession places a high priority on auditors' independence as the core standard of morality. It is imperative that accountants avoid conflicting interests and other problematic business links when providing financial solutions. An accountant's competence to give an unbiased assessment of an organization's financial data may be harmed if they fail to maintain their objectivity and independence. It is crucial for auditors to be objective and independent in their work. Public accounting companies and personal certified public accountants (CPAs) are typically limited services they may provide to their customers. General financial reporting, audits, taxes, and management consultancy services are all included in auditing. They may lose their neutrality and independence if they execute more than one service for the same customer (Ariail, Smith and Smith 2020). When a person audits their own work, they are basically re-checking their own work. An accountant may be able to conceal a company's unfavorable financial facts in this case. We'll look at how the Code of Ethics is used in real life, as well as how fraud risk indicators are identified in the context of the Omancell case.

Professional skepticism is suitable to be applicable by Mr. Omar, the financial controller of Omancell for the year ending December 31, 2021, at different phases of the strategic audit planning, and some such instances are provided below: Comment by Nandini Balaji: Recommending to first explain what is professional skepticism and its importance

While Mr. Omar is examining Omancell's trustworthiness, he should also take into account any issues that may affect the consultant's ability to operate with professional judgment, including ethical risks to impartiality, before accepting the partnership. It is important that Mr. Omar exercise caution while conducting risk assessments throughout the audit preliminary stages (Jenkins, Popova, and Sheldon 2020). Mr. Omar, for instance, should not take senior management justifications for the findings of analytical techniques at current valuations, and therefore should collect corroborative proof for the reasons presented.

For example, Mr. Omar should be prepared to criticize Omancell's management, particularly when it comes to issues requiring judgment, such as difficult or subjective concerns. The trustworthiness and sufficiency of information must be taken into account, especially in cases where fraud is a concern. If Omancell management ignores Mr. Omar's effort to seek documentation from a third party, this might affect independence and objectivity throughout auditing (Jenkins, Popova, and Sheldon 2020). He will have to decide how much faith may be placed in evidence acquired from management, such as an inquiry with the administration or a written declaration from the administration. ISA 200 states that 'a confidence that administration and those responsible with accountability are trustworthy and have honesty does not free Mr. Omar of the duty to retain professional judgment or enable the auditors to be pleased with less than convincing audit evidence when establishing adequate confidence. Comment by Nandini Balaji: Omar is Omancell's management. He is the financial controller. Please read and understand the scenario appropriately and reconsider this entire portion

Mr. Omar must be on the lookout for inconsistent evidence while analyzing audit evidence since this might undermine the validity and acceptability of the evidence acquired. Given that Omancell has been dealing with a lot of competition. As a result of the Covid epidemic, people are now more likely to shop online. As a result, several brick-and-mortar stores have gone out of business. Considering the total adequacy of proof to substantiate the independent review view should be another consideration for Mr. Omar when formulating the auditor's conclusion. By looking at the financial accounts as a whole and determining if they are accurate (Jenkins, Popova, and Sheldon 2020). Professional skepticism could subsequently lower the chance of discovery. In order to ensure those audit methods are used effectively, as well as to minimize any risk of incorrect conclusions being drawn by auditors based on their findings.

Omancell's unique sector and activities necessitate a customized vulnerability assessment. Risk assessments should be conducted by management and managers in charge of every department to determine the organization's exposure to hazard and risk occurrences. The risk identification must be updated on a frequent basis because of the unforeseen events in both the internal strengths and weaknesses (Spalding, Albert, and Lawrie 2019). Any structure the business prefers for internal controls over financial reporting can be used, such as a matrix or an in-depth narrative. Anti-fraud measures should be put in place by Omancell's Management board and all parties involved, based on the expectation and influence every risk has on the business. Asset theft, financial and non-financial disclosure, legal requirements, and unlawful conduct should all be included in fraud prevention and detection. Comment by Nandini Balaji: recommending to first explain what is fraud.

Inappropriately Taking Assets

Cash, goods, and other firm assets are all vulnerable to theft and should be scrutinized for signs of scraping, larceny, and other fraudulent activity. Workers that misuse office supplies, such as desktops, for their own profit are likewise involved in asset misappropriation. Mr. Omar was able to check on the sale and purchase contracts of the stores they had sold and earned a profit on the same (Spalding, Albert, and Lawrie 2019). A new inventory control system has also been implemented. Comment by Nandini Balaji: How does the company recording a gain on sale and leaseback lead to misappropriation of assets by Omar? Comment by Nandini Balaji: Recommending to elaborate how this can lead to a fraud risk factor

All financial and non-financial information

Internal fraud can be revealed through discrepancies between monetary and nonmonetary data. Exaggerating incomes, earnings, and assets; and underestimating costs, losses, and responsibilities are all examples of fraud in financial reporting that may be perpetrated by management by overcoming internal controls (Spalding, Albert, and Lawrie 2019). Non-financial performance measurements, including the number of infrastructures, the number of Comment by Nandini Balaji: This is a recommendation dear. not a fraud risk factor. Evaluate if the factor you are suggesting is there for omancell and provdie appropriate evidedences

customers, and the number of personnel, must be examined by Mr. Omar (depending on the company).

Areas of Regulatory Enforcement

It is imperative for auditors to keep an eye on a corporation's risk of theft and its framework to assist as external concerns like the coronavirus outbreak become more complicated. World events like the outbreak could contribute to a decline in compliance activities, according to a new analysis by EY (Spalding, Albert, and Lawrie 2019). Does the company's compliance program only serve as a "check-the-box" exercise, or does it go much beyond that? Mr. Omar should find out.

Acts Prohibited by Law

Fraud is criminal conduct at its core, and auditors must be familiar with the features and symptoms of fraud at all times. Also, the methods utilized to perpetrate fraud and the types of fraud that are related to the audited activities are taken into consideration. Helpful in assessing fraud risk is the Fraud Risk Assessment (Spalding, Albert, and Lawrie 2019). Fraud prevention and detection may be reasonably certain when specialists are involved.

Observance of the criteria of an auditing code of ethics is necessary to bind auditors all over the globe to fulfill their engagement goals successfully, as well as to provide reasonable assurance to those who utilize financial statements. Code of ethics principles are also referred to as "basic ethical principles," and auditors must ensure that all of these standards are met. A few of the most important fundamentals are truthfulness, objectivity, competence, caring, and respect for others' privacy and dignity. However, auditors may encounter or anticipate to encounter situations in which they are unable to meet ethical standards while carrying out their duties as an engagement auditor (Ishaque 2019). Such stumbling blocks are known as threats to basic concepts. The following is a general classification of dangers, which can take many various forms.

Comment by Nandini Balaji: Scope for additional threat factors to be identified

Comment by Nandini Balaji: For all the threats youhave mentioned recommending to suggest appropriate examples from the scenario and also appropriate safegaurds

Self-Review Threat

If a monetary or other interest influences the professional accountant's judgment or conduct, this is referred to as a "self-interest danger." As a result of the global financial or other objectives of close relatives, personality risks may be on the rise. In this Omancell scenario, Omar is a CPA who has learned about the importance of accounting in the public good during his learning and professional technical program (Drogalas et al. 2017). An auditing supervisor in the organization has been requested by Omar to be allocated to the assessment of Omancell. Fathima has no better understanding of customer audit expertise and has not been initially assigned to the Omancell audit. Omar's niece Fathima has been revealed after additional inquiry (Ishaque 2019). When a CPA evaluates documentation during a certified appointment that is based on her or her company's business non-attest work, a self-review danger occurs. The most likely place for a self-review risk is when an assurance company delivers solutions other than certification to an ensuring customer that provides numerous services. Comment by Nandini Balaji: How is fathima being omar's niece self review threat dear?

Familiarity threat 

As a result of the audit company and its workers getting overly intimate with the customer and its workforce, and independence, danger occurs. Professional skepticism is in jeopardy under these conditions. Because it's common for a threat of familiarity to occur in combination with a threat to one's own interests, below are some instances about when this possibility could develop (Johnson, Larson, and DeMersseman 2017). CPA on the attest steering committee whose partner is the CEO of the client's company. It was noted to Omar that Abdullah took the opportunity to fix the system faults, worked multiple jobs over the weekend, and refused to take time off until the program was running properly. Under the sale-and-leaseback agreement, the corporation has also sold a number of its stores. Comment by Nandini Balaji: How is this a familiarity threat dear?

Advocacy Threat 

A few times a year, auditors may function as a client's publicist or advocate. The consumer advocate is used in these cases by the auditor. When auditors advocate on behalf of a client, they put themselves at risk of losing their impartiality. In the majority of circumstances, a tiny impact may be overlooked. However, if the consultant's evaluation or impartiality is damaged as a result of such lobbying, there is an advocacy hazard. Most audit companies do not restrict their services only to auditing. They could also offer additional benefits like accountancy, taxes, and consulting (Johnson, Larson, and DeMersseman 2017). In rare situations, auditors could also intervene on behalf of their clients to advocate, advocate, or protect them. When picking sides with the client jeopardizes the auditor's credibility, the advocacy danger is greatest.

Undue Influence Threat

Member subordination to an individual linked with the client or any other relevant third party is threatened by an overwhelming influence threat because of that individual's reputation or competence, confrontational response, and efforts to compel and exert inordinate implication on the membership (Johnson, Larson and DeMersseman 2017). Omancell is exploring a post-year-end share sale to fund a digital presence to stay up with consumers' shifting preferences and also to extend into other Middle Eastern nations, such as Bahrain. Because of this, Omar has asked that an auditor's report be completed by February 1, 2022. (4 weeks earlier than usual). As a thank you for their efforts, Omar has also promised to deliver the most recent android phones from high-end businesses. Comment by Nandini Balaji: please reconsider the type of threat

Intimidation threat 

It occurs when the auditor is physically or mentally harassed to prevent him from functioning objectively, whether explicitly or implicitly. For example, an auditor may be threatened with not being paid the audit fee or having future audits with the auditor canceled if he finds it accurately. In Omar's opinion, Abdullah was responsible for solving the system's problems by working more hours and refraining from taking time off until the program was running properly (Johnson, Larson, and DeMersseman 2017). Under the sale-and-leaseback agreement, the corporation has also sold a number of its stores. Physical threats, such as injuring close relatives, and the use of intimidation of the auditors, may be used. Comment by Nandini Balaji: how is this intimidation threat?

Management Participation Threat

An employee may acquire managerial duties during an engagement to deliver non-attest services, for example (Agustina, Nurkholis, and Rusydi 2021). You cannot be your company's chief financial officer (CFO). The management policies of Omancell have been flouted in the past. A few directors and managers have informed me that they are dissatisfied with the substantial number of policies and regulations since they are time-consuming to keep up with (Lawson 2019). I also appreciate their reluctance to implement controls since they perceive them as time-consuming and time-consuming. Comment by Nandini Balaji: Is this threat or fraud risk factor?

· Requirements for admittance into the professional in areas of knowledge, expertise, and competence; would assist Omancell in avoiding circumstances like the one in which Omar has proposed that Fathima, an auditing supervisor in the department, be transferred to the assessment of Omancell. Fathima has no prior expertise auditing the retail industry and has not before been allocated to the assessment of Omancell. Fathima is Omar's niece, which is discovered after more research.

· Improved corporate management rules; would assist Omancell in avoiding problems such as non-compliance with management regulations inside the firm.

· Expert or legislative surveillance and disciplinary processes should be implemented by Omancell. The concept of appropriate conduct requires all internal auditors to adhere to applicable rules and regulations and to prohibit any activity that the auditor understands or should understand may bring the profession into disrepute.

· External inspection of a competent auditor's statements, taxes, correspondence, or documents by a legally authorized third party

In summary, this study explored the practical implications of adhering to the Ethical principles and identifying fraud risk factors in the context of the Omancell case scenario. It is essential for accountants to maintain a level of objectivity and independence. Auditors must avoid potential biases and other ethical dilemmas while offering financial advice. Mr. Omar, the financial administrator, is likely to use professional judgment at different phases of the audits for Omancell for the fiscal year ending December 31, 2021, beginning with the preliminary stages and continuing throughout the assessment process. To bind auditors all over the globe to successfully fulfill engagement objectives while also offering users of its financial statements with sufficient assurance and holding them accountable for other elements of the professional, accountants must follow the criteria of the ethical standards. Academic, certification, and experience criteria for admittance into the field are among the ideas. It would assist Omancell in avoiding scenarios such as the one in which Omar asked that Fathima, an auditing senior in the division, be appointed to the audits of Omancell. Fathima has no prior experience with business auditing.

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Drogalas, G., Pazarskis, M., Anagnostopoulou, E. & Papachristou, A. 2017, "The effect of internal audit effectiveness, auditor responsibility and training in fraud detection," Accounting and Management Information Systems, vol. 16, no. 4, pp. 434-454.

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Jenkins, J.G., Popova, V. & Sheldon, M.D. 2020, "Monitoring the accounting profession under the AICPA code of professional conduct: An analysis of state board of accountancy participation," Journal of Accounting and Public Policy, vol. 39, no. 3, pp. 1-19.

Johnson, N.L., Larson, F. & DeMersseman, A. 2017, "Who's Taking the Accounting Class? Leveraging Professional Skepticism While Teaching Accounting Online", Journal of Business Case Studies (Online), vol. 13, no. 2, pp. 73-84.

Krishnan, G. & Peytcheva, M. 2019, "The Risk of Fraud in Family Firms: Assessments of External Auditors: JBE," Journal of Business Ethics, vol. 157, no. 1, pp. 261-278.

Lawson, R. 2019, "New Competencies for Management Accountants: Certified Public Accountant," The CPA Journal, vol. 89, no. 9, pp. 18-21.

Spalding, Albert D., Jr & Lawrie, G.R. 2019, "A Critical Examination of the AICPA's New "Conceptual Framework" Ethics Protocol: JBE," Journal of Business Ethics, vol. 155, no. 4, pp. 1135-1152.