Advanced Audit and Assurance

Question:

a) Comment on the ethical and other proffesional issues raised bu the above matters and their implications for the acceptance of the engagement.

b) Discuss on the potential safeguards that Chong and Alex should implement.

Tim, is a recently promoted Audit Manager working for a two partner firm, Chong an public accounting firm specializes in auditing medium size construction industri es. There are only 10 staff in the firm, inclusive of the two audit partners. None of the staff has experience in auditing large nstruction firm and preparing group audit of subsidiary in foreign countries. Tim has been assigned a new audit of Aidil Maju Berhad (AMB) by one.of the Audit Partners, Alex. Based on the information gathered for the audit, he discovered that the Alex, his superior, is one of the Non - Executive Director who sit in the Audit Committee of the AMB. Tim later discovered that Alex has 5% shares in AMB. None of this information has been disclosed in the firm weekly audit meeting. AMB is a large construction firm. AMB also have few subsidiaries in foreign countries such as in Japan, Myanmar and Indonesia. The Chief Financial Officer (CFO), Ms Catherine of the new Company inform Tim that AMB is close to sign a new substantial amount of loan with MayBank Berhad. The unmodified audit report is thus very important to the Company. Melvin, the Audit Associate in CA, is also in charge of auditing AMB. Melvin knows that AMB is calling for a tender of cleaning services value at RM200,000. Melvin asked his brother in law to participate in the tender exercises and eventually was awarded the tender by AMB