Question One (30 Marks) Registered external auditors must have the knowledge and skills to perform their function and should be honest. There are also a number of other attributes or fundamental principles of ethical behavior, which all auditors should have and these are identified in professional external auditing standards issued by IRBA as follows: integrity objectivity professional competence and due care confidentiality professional behavior The following actions taken by registered external auditors are example of non-compliance with one or more principles listed above; Case 1 Mark Proctor, a registered auditor arranged with some of his clients to pay the fees that he charged for audit services, in cash. For clients who agreed to do so, no VAT was charged and a discount was given. (4 marks) Case 2 Because the budget for the audit of Afrimat Ltd would be exceeded and because he felt that, he had a competent audit team, A Smith the registered auditor in charge of the audit decided not to spend the (3 marks) necessary time on reviewing the work papers of the audit team. Case 3 Clark Parker the registered auditor in charge of the audit of Datatec Ltd, made racist comments concerning the client's staff during the audit planning session. (2 marks) Case 4 Peter Kent the registered auditor in charge of the audit of Advetech Ltd, charged the client a fee for audit procedures that he knew had not actually been carried out. (2 marks) Case 5 Scott Temple, the registered auditor in charge of the audit of Crookes Brothers Ltd, failed to identify the misapplication by the client of an important accounting policy. The misapplication resulted in a material (2 marks) overstatement of the company's profit. During the planning stage of the audit of Delta Financial Services Ltd, a company which invests money on behalf of its clients, Andre Richter the registered auditor in charge of the audit, was given access to the investment strategy which the company intended to adopt. Andre noted the listed shares which Delta Financial Services Ltd intended to (3 marks) purchase and instructed his own stockbroker to immediately purchase a number of these shares for Andre Richter's family trust. REQUIRED 1.1 Briefly explain each of the principles of ethical behavior listed above. (10 marks) 1.2 Identify, with a brief explanation which of the fundamental principles have not been complied with in each of the situations above. (Each situation may amount to non-compliance with more than one principle) (16 marks) 1.3 Discuss the similarities and differences, if any, between the code of ethics for external auditors (IRBA) and the code of ethics for internal auditors (IIA). (4 marks)
