Advance Audit and Assurance

a) Identify and discuss the ethical and other professional issue relating to the above mentioned matter.

b) Discuss on the potential safeguards that should be implement in the above case.

QUESTION Sue, Liean and Ray have been good friends since their college years. They were partners in a public accounting firm, Sue, Liean & Co (SLC) since 2005. Hakim Enterprise Sdn Bhd (HESB) is one of SLC's clients. SLC has been HESB's external auditors for the past three years. Recently, HESB is facing difficulties in collecting overdue debts from their customers. As a result, SLC's last year audit fees have been outstanding for the last 6 months. HESB has given an intention to continue appointing SLC as the external auditor for the current year audit. Ray is the senior in charge of the audit of the financial statements of Aidil Maju Berhad (AMB) for the year ending 31 December 2013. AMB's CEO, Mr. Ikhwan, has just sent Sue an email to advise Sue that Ray has been shortlisted for the position of Finance Director. Sue were not previously aware that Ray had applied for the position. In addition, Sue was also being informed by one of the managers who reviewed AMB's audit that Ray and his family has been given a free world tour trip by Mr. Ikhwan. Kerry Enterprise Sdn Bhd (KESB) an audit client, is threatening to sue SLC In respect of audit fees charged for the year ended 31 December 2012. KESB is alleging that SLC billed the full rate on air fares for audit staff even after obtaining substantial discounts for the fares. Required Identify and discuss the ethical and other professional issues relating to the above mentioned matter Total 20 Marks)