You are an accounting student and have just completed your second year. You are asked by your uncle to do his books. You agree to do so. Your uncle tells you he wants to pay as little tax as possible and has asked you to include accounts for his personal spending in his business accounts to increase expenses, so that he appears to make a smaller profit. Your uncle does not keep clear records of certain transactions. Payments are often made in cash and insufficient details are recorded for you to determine who was paid, or for what they were paid. Do you agree to do his accounts and do you inflate his expenses? Do you seek answers to any questions that arise from his accounts?

Apply the AAA 7 step process and the code of ethics (5 principles) to structure your answer. Identify any threats that may exist to an ethically sound audit.