Bon Appetite Limited (BA) is a well known food and beverage company listed in Hong Kong It runs over 150 Chinese, Asian and Western restaurants and bakery shops in Hong Kong Wong, Chen Co has been the auditor of BA for the past 15 years From a better corporate governance perspective, the Audit Committee of BA has decided to rotate audit firm in coming year Thomas Leung, the Chief Financial Officer of BA, has therefore approached Mavis Mok, the audit partner of Tang Mok CPAs Co, for an audit service proposal and would like to nominate Tang Mok CPAs Co as BAs new auditor Thomas and Mavis were classmates in University and are good friends since then Thomas frequently seeks Maviss advice on various matters including some accounting treatments and tax computation Required (a) Assuming Wong, Chen Co continues to be the auditor of BA, discuss any professional and ethical issues arising from the relationship between BA and Wong, Chen Co Recommend any possible safeguards to solve the ethical problems (5 marks) (b) Assuming Tang Mok CPAs Co is appointed to be the new auditor of BA, discuss any professional and ethical issues arising from the relationship between BA and Tang Mok CPAs Co Recommend any possible safeguards to solve the ethical problems (8 marks) (c) Explain the procedures that Tang Mok CPAs Co should carry out before accepting the auditor appointment from BA (6 marks) (d) In the proposed change of auditor appointment, Tang Mok CPAs Co should communicate with Wong, Chen Co to request for professional clearance No reply has been received so far Suggest follow up actions that should be carried out by Tang Mok CPAs Co on this matter

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Posted on Jul 22, 2024

Bon Appetite Limited (BA) is a well-known food and beverage company listed in Hong Kong. It runs over 150 Chinese, Asian and Western restaurants and

Bon Appetite Limited (BA) is a well-known food and beverage company listed in Hong Kong. It runs over 150 Chinese, Asian and Western restaurants and bakery shops in Hong Kong.

Wong, Chen & Co has been the auditor of BA for the past 15 years. From a better corporate governance perspective, the Audit Committee of BA has decided to rotate audit firm in coming year. Thomas Leung, the Chief Financial Officer of BA, has therefore approached Mavis Mok, the audit partner of Tang & Mok CPAs & Co, for an audit service proposal and would like to nominate Tang & Mok CPAs & Co as BAs new auditor.

Thomas and Mavis were classmates in University and are good friends since then. Thomas frequently seeks Maviss advice on various matters including some accounting treatments and tax computation.

Required:

(a) Assuming Wong, Chen & Co continues to be the auditor of BA, discuss any professional and ethical issues arising from the relationship between BA and Wong, Chen & Co. Recommend any possible safeguards to solve the ethical problems.

(5 marks)
(b) Assuming Tang & Mok CPAs & Co is appointed to be the new auditor of BA, discuss any professional and ethical issues arising from the relationship between BA and Tang & Mok CPAs & Co. Recommend any possible safeguards to solve the ethical problems.

(8 marks)
(c) Explain the procedures that Tang & Mok CPAs & Co should carry out before accepting the auditor appointment from BA.

(6 marks)
(d) In the proposed change of auditor appointment, Tang & Mok CPAs & Co should communicate with Wong, Chen & Co to request for professional clearance. No reply has been received so far. Suggest follow up actions that should be carried out by Tang & Mok CPAs & Co on this matter.