Page 29 - AAA Integrated Workbook STUDENT S18-J19

Code of ethics and conduct

Example 1

Integrity – The audit firm made a mistake when calculating the amount of
expenses to be recharged to the client and overcharged them. The client did
not notice and has paid the full amount. To comply with the principle of
integrity the audit firm should inform the client and repay the amount
overcharged.

Objectivity – The audit firm earns 40% of its income from one company by
providing audit and non-audit services. The audit firm should not be
dependent on a client for fees as this will impair their objectivity and affect the
outcome of the audit. The firm will not want to upset the client for fear of losing
them therefore the auditor may ignore material misstatements in the financial
statements rather than request them to be adjusted.

Professional competence and due care – The audit firm did not allow
sufficient time to complete the audit of a client and as a result some of the
planned audit procedures were not performed. The auditor will not have
obtained sufficient appropriate evidence which is required by ISAs. As a result
the audit has not been performed with professional competence and due care.

Confidentiality – a member of the audit team has told friends and family to
buy shares in an audit client as they expect the share price will rise when the
financial statements are published next week. The auditor should not disclose
information about the client outside of the audit team as this is a breach of
confidentiality.

Professional behaviour – Outside of working hours an auditor was involved
in a road traffic accident but left the scene in order to avoid any punishment.
Leaving the scene of an accident is a criminal act. Such behaviour discredits
the profession and is a breach of the fundamental principle of professional
behaviour.

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