Larry and Joe are two audit seniors working for Sampson &

Associates. Both started employment with the audit firm around the same

time. They have mutual respect for each other; however, they have been

highly competitive since they commenced work together.

Larry has recently married and he and his wife are paying off their mortgage.

Joe is single with no commitments. They have both been seniors for almost

two years and are looking for promotion to audit supervisor. They are both

aware that there is only one supervisor position available.

Larry recently replaced Joe on the audit of Tower Ltd. The reason they were

both given for the change was that another assignment had arisen with a

long-time client of Joes. Once Larry had replaced Joe on the Tower audit,

he realised that the client had called the audit manager to say that they

were not impressed with Joe, as he had missed a number of issues within

the audit and was arriving at work late. The audit manager had not

discussed these comments with either Larry or Joe.

After going through the work that Joe had completed, Larry realized that Joe had performed an excellent job, identifying a number of issues that he thought he might

possibly have missed. Furthermore, Larry suspects that Joe and the client

had a personality conflict, and that the client has misled the audit manager.

Larry realises that he can finish off the audit, resolve the issues and obtain a

good review from this assignment, which would help him in the promotion

stakes. He also knows that the audit manager is unlikely to bring the clients

unsupported allegations to Joes attention.

Required:

Based on the case scenario, explain the impact of professional ethics on audit quality. (You need to refer to relevant paragraphs in PES 1)