Mtr Skate is one of the partners of a small firm of public accountants, and is responsible for the audits within the firm. He received a phone call from the Managing Director of Slick Software Ltd., Ms Jones. Ms Jones said that her company would like an audit performed within a month because the company’s bank required audited financial statements. She offered Mr Skate a fixed fee, plus a bonus if the audit was completed within a month. Mr Skate immediately accepted the assignment.

On returning back to the office, Mr Skate realised that none of his audit staff was available for the next month. Knowing that the tax section of the firm was quiet, he requested the services of a tax graduate for the next month. The partner in the Tax Section allowed him to use a young graduate, Thomas, who had been working with the firm for three months — who had never before performed an audit.

Mr Skate called Thomas into his office and spent an hour briefing him on the fundamental principles of auditing. He explained that he required the audit to be completed on time and that he did not want Thomas wasting time testing controls. Mr Skate said Thomas was to perform a detailed analytical review, and from those results substantiate unusual balances — this would be the main part of the audit.

After three weeks, Thomas returned to the office and gave Mr Skate the financial statements (without Notes, or a Directors’ Statement). Mr Skate gave the figures a careful review and when he was satisfied they appeared reasonable, signed the audit report.

Required

(a) Has Mr Skate breached any of the quality control guidelines as outlined in SAS 240?

(b) Are there any ethical issues raised in this case study?