Auditing

Assignment 1 – Auditing 300 (Semester 1/Trimester 1A, 2014) You have just been employed as a junior auditor at the chartered accountant firm of SGT. Upon joining

the firm; the partners requested that you review the firm’s audit clients to ensure that the independence

requirements of APES 110 are being met for the financial year ending June 2013.

Your review has revealed the following:

(a) Sara Adnan, one of the senior partners of SGT responsible for the Sunrise Ltd’s audit team for the financial year ending June 2013, recently came back from a 6 nights and 7 days cruise with her

partner. It was an expensive trip but she received a 65% discount. The CEO of Sunrise Ltd

arranged this concession for her as a gesture of his appreciation for a job well done.

(b) Adam Parker, is the current senior manager on the audit of Synergy Techno Ltd. Synergy specializes in the production of electronic equipment and they have showrooms only in

Melbourne and NSW. Besides working for SGT, Adam also owns a car showroom in Perth (a

family business). The business is not doing very well at the moment. After having a brief

conversation with the CEO of Synergy, he decided that he is going to display and promote

Synergy’s equipment here in WA. Adam has informed you that this is not going to be a problem

since he is just going to promote Synergy’s product.

(c) Leon Ziller, is the current senior manager on the audit team of TMG Ltd, the newest client of SGT. TMG specializes in the production of mining equipment. Leon used to work for TMG Ltd,

as one of their senior accountants. He left TMG during the end of 2009 and joined SGT on March

2012.

(d) Other than the provision of audit services, SGT is also reputable for the quality of its non- assurance services. The non-assurance service department of SGT is highly regarded because

they have several experienced and qualified members. SGT’s strict policy does not allow the

members of the non-assurance department to participate in any of their assurance services. SGT

has been providing Platinum Fabricators Ltd, a listed company, audit services for the last 3 years.

This year SGT has decided to provide some bookkeeping services as well to the three major

subsidiaries of PFL, out of the four subsidiaries.

(e) Ashley Jonson, a senior auditor at SGT, has been on the audit team of Beximco Ltd for a number of years. She was recently thinking of buying a land outside Perth to build a summer house and

she has already spoken to her bankers for loan. As the CFO of Beximco has known Ashley for a

number of years now, he decided to help Ashley by seeking the approval of the board in order for

Beximco to act as a guarantor for her loan.

Required

For each of the independent situations above, and using the conceptual framework in APES 110,

answer the following questions.

1. Identify potential threats to independence & recommend safeguards to reduce the independence threat. (5 marks)

2. Provide an objective assessment of whether audit independence can be achieved.

(5 marks)

(Total 10 Marks)