QUESTION 1 (IFAC CODE OF CONDUCT) (30) Registered auditors are frequently tasked with situations with ethical implications in the course of offering their services. The Code of Professional Conduct provides a conceptual framework to assist registered auditors in addressing ethical issues. The following situations have arisen: 1. Abbott and Company, a large firm has been the auditor of Circle (Pty) Ltd for a number of years. Circle (Pty) Ltd intends to issue fifty $100 000 convertible debentures. Dave Abbott and Joe Peterson, the two partners of Abbott and Company, will be offered the opportunity to each take up one of the debentures. Neither Abbott nor Peterson is in charge of Circle (Pty) Ltd audit. (5) 2. Fred Romano a former trainee at Abbott and Company, has recently been appointed the financial manager of Buildfast Ltd, a large supplier of building materials. Buildfast Ltd is an audit client of Abbott and Company and before his resignation from the firm, Fred Romano had been the audit manager for this client. From Romano, Freds twin sister will be appointed as the audit manager to replace Fred, due to her experience in the building sector. (7) 3. Two of the younger partners at Abbott and Company want to be more aggressive in marketing the services of Abbott and Company. They wish to run a radio and television advertising campaign based around a new slogan which they have proposed Abbott and Company bigger, better, in fact, brilliant! (3) YOU ARE REQUIRED TO: a. Identify and explain the fundamental principles on which the Code of Professional Conduct is based and with which professional accountants must comply. (15) b. Explain the conceptual framework. (5) c. Discuss each of the situations described above in terms of the Code of Professional Conduct. Where you believe a threat or potential threat to compliance with the fundamental principles exists, you should identify the nature (category) of the threat. (15)