Christine Jones CA is an auditor with EwY, a national audit firm. She is new to EwY and is currently working, for the first time, on the annual audit of the financial report of Brown Pty Ltd (Brown), a shipping company.

Brown has been a client of EwY's for many years and is now one of its largest clients. Because Brown is involved in international shipping, the audit of its contractual arrangements is an important part of the audit. Christine is well qualified to undertake such audit work because, in addition to being a qualified auditor, she is a qualified solicitor.

While reviewing the contracts, Christine discovered that Brown had recently merged with a local trucking firm, Red Pty Ltd (Red) for whom Christine worked when she first graduated. Christine was proud of her achievements at Red, and when she left, she had reached the position of senior legal counsel with the firm. However, her passion was in auditing, and so she moved to EwY. She was delighted to see that some contracts she had written for Red were being used as templates by Brown.

Half-way through the audit, a member of the audit team became unwell and had to take time off work. This placed pressure on the remaining team members. Christine raised the matter with the audit partner, Sarah Smith, stating that the quality of the audit work might be compromised because staff did not feel they had sufficient time to address all the requirements of the audit program. Sara told Christine that, while she appreciated that there was a problem, she did not wish to allocate more resources to the audit of Brown because of the additional cost that would be incurred. Furthermore, Sarah Smith stated, "the only way that more staff could be allocated to the audit of Brown would be to extend the completion date for the audit. This could have a negative impact because Brown required the audit to be completed quickly this year in order to apply for a government export grant. We cannot afford to risk losing Brown as an audit client", Sarah added, "with the recent slow-down in the economy, and the loss of some large clients, Brown is now our largest client. If you persevere, I will make sure you are considered favourably at the next promotion round".

Christine reluctantly accepted Sarah's position, and was comforted somewhat when she confided in her brother, an experienced public sector internal auditor, who told her that, in his view, she had done the right thing in raising the matter with the audit partner.

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 Brown'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.