Question
Razman, the senior auditor of Rizal & Co., incharged of the financial statements audit of SuraHealth Sdn.Bhd. (SMSB) for the year ended 31 December 2020.
Razman, the senior auditor of Rizal & Co., incharged of the financial statements audit of SuraHealth Sdn.Bhd. (SMSB) for the year ended 31 December 2020. SMSB is important to the firm as the company contributes about 30% of the firms total income for the assurance and non-assurance services. During the first meeting with the management, Razman was informed that the company has a tax dispute with the Lembaga Hasil Dalam Negeri (LHDN). The management wanted Razman to join them in a meeting with the LHDN to settle the dispute and Razman agreed to attend.
On the their first day at the client office, Ramli, one of the audit team members, told that his wife works as the accounting executive in SMSB. The manager of SMSB offered Razman and his team a 20% discount for all products purchased from SMSB. This is special as the normal discount given to other customers is 10%. During the audit, Razman found that the closing stock has been inappropriately valued and suggested the correction to be made. However, the accountant of SMSB disagreed and warned that if the auditor does not accept his treatment, the company will not award the information technology consultancy job which initially planned for the auditor.
Explain the ethical issues, the related threat and suggest any safeguard to reduce the threat to an acceptable level.
Topic : MIA BY LAWS /LEGAL LIABILITY/GOVERNANCE. (AUDITING)
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