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CASE: Stephen Gibbs CA, is an auditor on the audit of Harper Pty Ltd (Harper). While this is his first year on this audit, he

CASE:Stephen Gibbs CA, is an auditor on the audit of Harper Pty Ltd (Harper). While this is his first year on this audit, he is enthusiastic in the knowledge that the audit partner, Margot French, has overseen the statutory audit of Harper for the last seven years. During this time, she has come to appreciate and respect the professionalism and judgement of Harper's CFO, George Wilson. In fact, Margot and George served together for three years on the board of their professional association, Chartered Accountants Australia.

When allocating staff to various parts of the audit program, Margot noticed that, in addition to being a Chartered Accountant, Stephen had a degree in law. Consequently, she asked him to review the most significant sales and purchasing contracts entered into by the client. Stephen agreed, but was concerned about his ability to undertake the review, because he had never used his knowledge of law in a professional capacity; rather he felt that his strengths were in the accounting and finance disciplines. In an effort to ensure that he did not let-down the audit team, or take too long to do work, Stephen sought advice on some of the contractual issues from his father, Graham, a retired solicitor.

Towards the end of the audit, while she was reviewing the audit working papers, Margot noted that, another young auditor, Grace Smith CA, had performed the preliminary assessment of control risk very well, and in a very short time. At a team meeting, she congratulated Grace on her fine work.Later that day, Stephen joked with Grace about this comment, calling her a "star". Grace replied, "I wish it was so, but the reason I was able to do the work so quickly was that Harper uses an application program that I helped develop in my previous job as an accounting software developer".

REQUIRED:

On the basis of the facts provided above, and your understanding of the Code of Ethics for Professional Accountants:

(i)Identify three ethical issues that may impact the audit of Harper's financial Statements.

(ii)Explain why each of the issues identified above is of concern.

(iii)For each issue you identified, state the paragraph reference in APES 110 that provides guidance on the matter.

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