List 6 ethical issues in relation to the APES 110 legal section.

In April 2020, Evans and Associates (EA) merged with MKG Walters (MKGW), a practice that was established 20 years ago, with a head office located in Toowoomba and offices in Stanthorpe, Robina and Gympie. The firm offers a range of services such as audit and assurances services as well as non-audit services including taxation, business services and business process improvement. The merger offered an opportunity to increase the audit and assurance service line to EA clients who are large privately owned companies.

MKGW has twelve (12) partners in total with all five (5) audit partners operating from the Toowoomba office. The other offices offer taxation and business services with two (2) non-audit partners in each of the three (3) offices. Jack Davidson, the partner in business process improvement operates from Toowoomba but also has staff in each of the other three (3) offices. Gordon Young (one of the business services partners) is an Authorised Financial Services Licensee (AFSL) and located at the Gympie office.

The Robina and Gympie offices, managed by the business services partners Rod Weaver and Kevin Jacobson, are keen to expand the MKGW business to provide the opportunity (to their existing clients) to purchase shares in unlisted companies that are now part of the firm's audit portfolio. At the last audit date, three of the taxation staff in the Stanthorpe office are family members of SPG where they have a direct financial interest from that business. In December 2021, Paul Evans applied to be part of the MKGW audit team, relocating from Stanthorpe to Toowoomba ready for his children to start the new school year. At his interview, Paul told the interview panel that he and his wife have a direct financial interest in SPG and he is the CFO's son-in-law.

Due to the current scrutiny of ASIC on audit quality, two of the audit partners (Graham Kelly and Peter Frazer) are working with the large privately owned companies in relation to the audit service line. Graham is a Chartered Accountant (CA), a Registered Company Auditor (RCA) and Peter Frazer is a Fellow of CPA Australia (FCPA) and an RCA. The firm's plan is to double its fees because many privately owned firms have indicated that they prefer to engage locally based practices to undertake their audit work to reduce costs and increase value which is different from what has happened when they (the privately-owned entities) have used larger CBD based practices.

One audit that was undertaken after the merger was that of Sinclair Pastoral Group (SPG) who has a 31 March year end. Although there were a number of management issues with the engagement in the FY20 year, both Graham and Peter keen to continue the engagement for FY21. The permanent file indicates that SPG is a large unlisted pastoral group which operates several holdings in Queensland, northern New South Wales, and the Northern Territory as well as an internationally accredited processing plant, 30,000 head feedlot and holding facility on the Darling Downs. There are over 300,000 head of cattle grazing on the holdings including breeding programs at each of the stations.

Graham Kelly will continue to be the Audit Engagement Partner (AEP) for SPG as the senior audit partner in MKGW. Graham's experience has primarily been in smaller primary industry, family-owned companies although his knowledge of accounting for biological assets is somewhat 'legendary' as the local technical guru. He has participated in a number of local committee/branch meetings of CAANZ and CPA Australia as well as speaking at conferences and education programs in relation to reporting and auditing biological assets.

Michael Brooks will continue as the audit engagement manager (a promotion he received after the merger) and has agreed to review to the engagement continuation decision. After discussion with Graham, the team is proposed to keep the team from last year although Paul Evans has been suggested to replace Andrew Johnson (Intermediate Auditor) and promoting Andrew to the Senior Auditor position. Andrew has been employed at MKGW since completing his degree and he completed his CA designation in late 2019. Paul Evans has a tax background and has not worked with the audit team previously. Andrew and Paul will work with the undergraduate team assigned from QUT. Once the SPG audit is completed, Peter Fraser will peer review the files.