QUESTION 2 (15 MARKS) PART A (9 MARKS) Chi & Partners Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Australia. During the 2019 year, Chi & Partners gained a new client, Medical Services Holdings Group (MSHG), which owns 100 percent of the following entities: Shady Oaks Hospital, a private hospital group Gardens Nursing Home Pty Ltd, a private nursing home Total Cancer Specialists Limited (TCSL), a private oncology clinic that specialises in the treatment of cancer, Year-end for all MSHG entities is 30 June. You are a senior auditor working on the Shady Oaks Hospital engagement for the 30 June 2019 financial year end and are currently in the planning stage of the audit. In discussions with management you discover that Shady Oaks has recently acquired two new, full body scanning machines. These machines use the latest technology and cost $10 million cach. Although they are more than 50 per cent more likely to detect tumours and other abnormal internal growths, a number of recently published academic studies suggest serious potential long-term side effects for patients scanned by these machines. However, because the machines are new the evidence about specific long-term effects will not be known for a number of years. Despite this, there has been some bud press and publicity highlighting the potential risks to patients exposed to these new machines Shady Oaks charges a premium price for using the new scanning machines and there is extremely high demand. To manage the demand Shady Oaks requires that all patients pay for their scans in full at the time of booking, and the payments are immediately recognised as revenue by the hospital. Shady Oaks has taken bookings for four months in advance - although it is only April 2019, the hospital has bookings for July and August 2019. The Australian Doctors and Hospital Association is currently reviewing the use of the new scanning machines and is considering hanning their use within Australia until the issue of their safety is resolved. A decision is expected on 1 August 2019, and management tell you that they believe there is an 80 per cent chance the scanners will be approved Required: (a) Identify two key account balances likely to be affected by the above information. (1.5 MARKS) (b) For cach account balance identificd in (a) above, identify the key assertions most at risk. (1.5 MARKS) (c) Explain why the assertions identified in (b) above are at risk? (6 MARKS) PART B (6 MARKS) B 6 For each of the below independent situations list any ethical principles breached and discuss possible alterative courses of action the auditor should have taken in order to properly discharge their ethical responsibilities. Situations Ethical principle(8) Alternate course of action the breached (I mark cach) auditor should have taken (2 marks each) Bob is an audit assistant currently undertaking university studies. While auditing the books of Club Casino, he comes across certain financial information that he believes will assist him in completing one of his university assignments. He copies the information and uses it in his assignment, carefully removing all reference to Club Casino in order to preserve the client's confidentiality Wendy has been the engagement partner on the Ace Limited audit for a number of years. Some time ago, Ace's long- standing company secretary retired and Ace toxok six months to find replacemeat. At Aoe's request, Wendy performed company secretarial duties for this period of time
