Case study

M/S Peter & Co is a well-known professional audit organization for the last two decades. Mr. Peter is a senior partner and has appointed four other partners subsequently. Perter & Co has three audit managers, five supervisors and twenty-five audit staff to handle audits of various business organizations.

Whenever audit engagements are accepted, Mr. Peter is much concerned about the fundamental principles that should be followed by the audit firm. He always insists that the audit managers and other audit staff adopt appropriate supervision during the audit process, and to ensure that the fundamental audit principles are fulfilled throughout the audit engagement.

Mr. George is one of the partners of Peter & Co has been assigned to oversee the audit of Abdullah LLC. The audit has been started under his guidance with an audit team of seven auditors including one manager and a supervisor.

While carrying out the audit process with Abdullah LLC, the audit manager has been informed by the supervisor that Mr. George is one of the major shareholders of Abdullah LLC and therefore receives a good amount of dividend every year. This fact was not brought to the notice of Mr. Peter before accepting the audit engagement. Mr. Georges investment value is significant and moreover, the audit fee that was agreed by Peter & Co is also very lucrative.

Ms. Nancy is another audit partner of Peter & Co and worked for many years and handled many audit engagements of Peter & Co. A new Bank which was formed five year ago approached Peter & Co to take care of auditing their statements for the year ended 31.03.2020. The client operations are huge and have 22 branches in Oman. Peter & Co have no past experiences of managing or conducting bank audits. Ms. Nancy was in favor of accepting the audit as it will give additional revenue and experience to the audit firm.

Based on the given scenario above, answer the questions given below.

NOTE: Your answers should be supported with proper justification in line with the principles and theories of auditing and should be reflective of adequate literature review. You can also include diagrams, charts and tables of information to support your arguments and justification (wherever applicable).

Task 3

Discuss the conduct of Mr. George in his profession as an auditor. and explain what are the appropriate actions that the audit firm can take to safeguard and implement ethical conduct.