You are a Chartered Certified Accountant and the newly appointed internal auditor of a company that is experiencing financial difficulties. As a condition for obtaining bank loans, the company has agreed to maintain specified liquidity ratios, assets to liability ratios and gross profit margins. The draft financial statements for the period appear to show that the company has not succeeded in complying with some of these requirements. The profit figures are significantly affected by the calculation of bad debts and depreciation charges. There has been suggestions that these could be changed in order to meet the banks conditions. There is a real danger that if the bank withdraws its funding, the company will become insolvent and will have to cease trading. The chief financial accountant has asked you to sign certain internal records that have been altered in order to show that the banks conditions have been met.

Required

Using the six step approach ethical dilemma framework, explain how the ethical dilemma may be resolved in these circumstances. (15 marks)

Part B

The following situations involves a possible violation of the ICAJ Code of professional Ethics. For each situation, (a) decide whether the code has been violated, and (b) briefly explain how the situation violates (or does not violate) the code. Make reference to the relevant section of the code.(15 marks)

(1) James Thurgood, CA stayed longer than he should have at the annual Christmas party of Thurgood and Thurgood, CAs. On his way home he drove through a red light, and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of alcohol. Because this was not his first offence, he was sentence to thirty days in jail and his drivers license was revoked for 1 year.

(2) Rankin, CA provides tax services, management advisory services, and bookkeeping services and conducts audits for the same clients. Because the firm is small, the same person often provides all the services.

(3) Davis, CA, sets up a small loan company specializing in loans to business executives and small companies. Davis does not spend much time in the business as he spends full time with his CA practice. No employees of Daviss CA firm are involved in the small loan company.

(4) Elbert CA, owns a material amount of stock in a mutual fund investment company called Henderson Investments Co., which in turn own stocks in Elberts largest audit client. Elbert is surprised to learn that Hendersons investment in his client has increased dramatically.

(5) Melissa Barry, a certified accountant is the auditor of Audio Video Limited. Audio Video has not paid Melissas audit fee for the last two years. Melissa is working on the current years audit.

(6) Brent Shaw, a chartered accountant, is the auditor of Caf Excel. A couple of weeks ago, Caf Excels management expressed an intention to commence litigation against Brent, alleging he was negligent in last years audit. Brent believes there is a strong possibility that management will proceed with litigation. However, Caf Excel has not fired Brent as its auditor, and he is now working on the current years audit.

Auditing Case Study - 10\% Due Date: November 2022 Part A You are a Chartered Certified Accountant and the newly appointed internal auditor of a company that is experiencing financial difficulties, As a condition for obtaining bank loans. the company has agreed to maintain specified liquidity ratios, assets to liability ratios and gross profit mangins. The draft financial statements for the period appear to show that the company has not succeeded in complying with soenc of these requirements. The profit figures are significantly affected by the calculation of bad debts and depreciation charges. There has been suggestions that these could be changed in order to meet the bank's conditions. There is a real danget that if the bank. withdraws its funding, the company will become insolvent and will have to cease trading. The chicf financial accountant has asked you to sign certain internal reconds that have been altered in order to show that the bank's conditions have been met. Required Using the six step approach ethical dilemma framework, explain how the ethical dilemana may be resolved in these circumstances. ( 15 marks) Part B The following situations involves a possible violation of the ICAJ Code of professional Ethics. Fot each situation, (a) decide whether the code has been violated, and (b) briefly explain how the situation violates (or does not violate) the code. Make reference to the relevant section of the code. (15 marks) (1) James Thurgood, CA stayed longer than he should have at the annual Christmas party of Thurgood and Thurgood, CAs. On his way home he drove through a red light, and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of aleohol. Because this was not his first offence, he was sentence to thirty days in jail and his driver's license was revoked for 1 year. (2) Rankin, CA provides tax services, management advisory services, and bookkeeping services and conducts audits for the same clients. Because the firm is small, the same person often provides all the services. (3) Davis, CA, sets up a small loan company specialixing in loans to business executives and small companies. Davis does not spend much time in the business as he spends full time with his CA practice. No cruployees of Davis's CA firm are involved in the small loan company. (4) Elbert CA, owns a material amount of stock in a mutual fund investment company called Henderson Investments Co., which in tum own stocks in Elbert's largest audit client. Elbert is surprised to learn that Henderson's investment in his client has increased dramatically. the bank s conditions. There as a real daciger that it the bank withdraws its funding, the company will become insolvent and will have to cease trading. The chief financial accountant has asked you to sign ecrtain internal records that have been alrered in order to show that the bank's conditions have been met. Required Using the six step approach ethical dilemma framework, explain how the ethical dilemma may be resolved in these circumstances. (15 marks) Part B The following situations imvolves a possible violation of the ICAJ Code of professional Ethics. For each situation, (a) decide whether the code has been violated, and (b) briefly explain how the situation violates (or does not violate) the code. Make reference to the relevant section of the code. (15) marks) (1) James Thurgood, CA stayed longer than he should have at the annual Christmas party of Thurgood and Thurgood, CAs. On his way home he drove through a red light, and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of alcohol. Because this was not his first offence, he was sentence to thirty days in jail and his driver's license was revoked for I year. (2) Rankin, CA provides tax services, management advisory services, and bookkeeping services and conducts audits for the same clients, Because the firm is small, the same person often provides all the services. (3) Davis, CA, sets up a small loan company specializing in loans to business executives and small companies. Davis does not spend much time in the business as he spends full time with his CA practice. No employees of Davis's CA firm are involved in the small loan company. (4) Elbert CA, owns a material amount of stock in a mutual fund investment company called Henderson Investments Co., which in turn own stocks in Elbert's largest audit client. Elbert is surprised to leam that Henderson's investment in his client has increasod dramatically. (5) Melissa Barry, a certified accountant is the auditor of Audio Video Limited. Audio Video has not paid Melissa's audit fee for the last two years. Meliss is working on the current year"s audit. (6) Brent Shaw, a chartered accountant, is the auditor of Cafe' Exeel. A couple of weeks ago, Caf Excel's managensent. expressed an intention to commence litigation against Brent, alleging he was negligent in last year's audit. Brent believes there is a strong possibility that managcment will proceed with litigation. However, Cafe' Exeel has not fired Brent as its auditor, and he is now working on the current year's audit. Auditing Case Study - 10\% Due Date: November 2022 Part A You are a Chartered Certified Accountant and the newly appointed internal auditor of a company that is experiencing financial difficulties, As a condition for obtaining bank loans. the company has agreed to maintain specified liquidity ratios, assets to liability ratios and gross profit mangins. The draft financial statements for the period appear to show that the company has not succeeded in complying with soenc of these requirements. The profit figures are significantly affected by the calculation of bad debts and depreciation charges. There has been suggestions that these could be changed in order to meet the bank's conditions. There is a real danget that if the bank. withdraws its funding, the company will become insolvent and will have to cease trading. The chicf financial accountant has asked you to sign certain internal reconds that have been altered in order to show that the bank's conditions have been met. Required Using the six step approach ethical dilemma framework, explain how the ethical dilemana may be resolved in these circumstances. ( 15 marks) Part B The following situations involves a possible violation of the ICAJ Code of professional Ethics. Fot each situation, (a) decide whether the code has been violated, and (b) briefly explain how the situation violates (or does not violate) the code. Make reference to the relevant section of the code. (15 marks) (1) James Thurgood, CA stayed longer than he should have at the annual Christmas party of Thurgood and Thurgood, CAs. On his way home he drove through a red light, and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of aleohol. Because this was not his first offence, he was sentence to thirty days in jail and his driver's license was revoked for 1 year. (2) Rankin, CA provides tax services, management advisory services, and bookkeeping services and conducts audits for the same clients. Because the firm is small, the same person often provides all the services. (3) Davis, CA, sets up a small loan company specialixing in loans to business executives and small companies. Davis does not spend much time in the business as he spends full time with his CA practice. No cruployees of Davis's CA firm are involved in the small loan company. (4) Elbert CA, owns a material amount of stock in a mutual fund investment company called Henderson Investments Co., which in tum own stocks in Elbert's largest audit client. Elbert is surprised to learn that Henderson's investment in his client has increased dramatically. the bank s conditions. There as a real daciger that it the bank withdraws its funding, the company will become insolvent and will have to cease trading. The chief financial accountant has asked you to sign ecrtain internal records that have been alrered in order to show that the bank's conditions have been met. Required Using the six step approach ethical dilemma framework, explain how the ethical dilemma may be resolved in these circumstances. (15 marks) Part B The following situations imvolves a possible violation of the ICAJ Code of professional Ethics. For each situation, (a) decide whether the code has been violated, and (b) briefly explain how the situation violates (or does not violate) the code. Make reference to the relevant section of the code. (15) marks) (1) James Thurgood, CA stayed longer than he should have at the annual Christmas party of Thurgood and Thurgood, CAs. On his way home he drove through a red light, and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of alcohol. Because this was not his first offence, he was sentence to thirty days in jail and his driver's license was revoked for I year. (2) Rankin, CA provides tax services, management advisory services, and bookkeeping services and conducts audits for the same clients, Because the firm is small, the same person often provides all the services. (3) Davis, CA, sets up a small loan company specializing in loans to business executives and small companies. Davis does not spend much time in the business as he spends full time with his CA practice. No employees of Davis's CA firm are involved in the small loan company. (4) Elbert CA, owns a material amount of stock in a mutual fund investment company called Henderson Investments Co., which in turn own stocks in Elbert's largest audit client. Elbert is surprised to leam that Henderson's investment in his client has increasod dramatically. (5) Melissa Barry, a certified accountant is the auditor of Audio Video Limited. Audio Video has not paid Melissa's audit fee for the last two years. Meliss is working on the current year"s audit. (6) Brent Shaw, a chartered accountant, is the auditor of Cafe' Exeel. A couple of weeks ago, Caf Excel's managensent. expressed an intention to commence litigation against Brent, alleging he was negligent in last year's audit. Brent believes there is a strong possibility that managcment will proceed with litigation. However, Cafe' Exeel has not fired Brent as its auditor, and he is now working on the current year's audit