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Suppose you are the external auditor of a hospital trust. The trust is hoping, and expecting, to receive enhanced status in the near future, which

Suppose you are the external auditor of a hospital trust. The trust is hoping, and expecting, to receive enhanced status in the near future, which will afford it more autonomy and provide opportunities to pursue a number of exciting projects. As the trust passed its financial year end, some unforeseen liabilities came to light. The trust’s director of finance and chief executive had reported to the board of trustees and the regulator that the trust would break even for the year. The director of finance then made a number of accounting adjustments in order to ensure that the trust would meet its financial responsibilities, including the requirement to break even each and every year. The adjustments required changing the accounting policy in respect of stock, which had previously been valued on a ‘first in, first out’ basis as specified by international financial reporting standards. In addition, certain salaries have been capitalized, and the trust has failed to account for its share of liabilities under a partnership agreement with a local authority, which has yet to prepare the memorandum account. The adjustments come to your attention during your audit process, and you do not accept that they are correct. As they are material, if the trust does not amend its accounts, you will have to qualify your audit opinion on the year end accounts. When you discuss the issues with the director of finance, he is emphatic that his view represents a legitimate interpretation of accounting policy. He indicates that if you do not accept it, he will ensure that the trust appoints different auditors next year. He also threatens to tell the local newspaper that your firm is determined to make the trust’s financial position look worse than it is.

Please read this case on external auditor of a public body and being subject to intimidation and write a paper answering the following:

1. Key of fundamental principles: (integrity, objectivity, professional competence and due care, professional behavior).

2. Consideration on identify relevant facts.

3. Possible course of action

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1 A professional accountant shall fulfill with the following key ethics Integrity Reported that the performance data available at the end of performance of the hospital trust is a direct and honest pi... blur-text-image

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