One of the sub-topics covered in Week 2 relates to APES 110 Code of Ethics for Professional Accountants. The code sets out the main ethical pronouncement for members of professional accounting bodies in Australia, which are, CPA Australia, Chartered Accountants Australia and New Zealand (CAANZ) and Institute of Public Accountants (IPA). APES 110 sets out five fundamental principles of professional ethics that apply to all members, as well as providing guidance on independence requirements for audit and review engagement and other assurance engagements. In addition, auditors will also need to be aware of potential threats that could compromise their compliance with the fundamental principles.

Read the attached SEC Accounting & Auditing Enforcement Weinstein document (Weinstein). This is one of a number of actions that the SEC took in relation to a "shell factory". I have attached a further document that provides some useful background information to the fraudulent scheme that relates to the action against Weinstein (see SEC v Perlstein et al).

Required:

Based on the Weinstein case above, and the topics related the fundamental principles of professional ethics (covered in Week 2) you need to reflect on the following:

Part A

Describe two (2) fundamental principles of professional ethics as stated in APES110, which were breached by Weinstein during the audit engagements in question.

Part B

Describe two (2) potential threats2 to auditor's compliance with the fundamental principles that might have contributed to the false representation of the financial statements and audits.