In the given assignment, accounting standards have been discussed. The foremost duty of the auditor will involve complying out the relevant accounting standards and taken into concern the ethical issues involved.
In this assignment, AAA model has been followed that will suggest logical seven step process need to be followed for the decision making process. While taking any decision, all the ethical issues need to be taken into consideration.
In the given mentioned case, Jacqui leak is one of the audit seniors at the Miller Yates Howarth and has been continuously participated in the environment related work. One of the long standing clients of the company is the Morgan fertilizers private limited and conducting operations in many of the cities. After conducting the audit of the Morgan fertilizers for the financial year ended 30 June, 2017, she noticed that company has changed its waste management company to Dump around limited and it has been known to her that the said company has been investigated by the local authorities for the purpose of toxic waste in one of its sites. Further, the contract among the two will not be signed by the Dump around and has not clarified the damages and is valid only for the three years. The local council carries out the required investigations and penalized the Dump around Jacqui concerned the same with the Barry, who is the charge of the audit and then Barry told Jacqui to mind her own business and then no need to concern about the fuss of the audit (Hope, et. al., 2013).
Every organization needs to conduct its business for the purpose of protecting the environment. The various kinds of issues present in the given case will comprise of necessary actions that need to be taken into consideration for protecting the environment. In the given case, no provisions have been made by the company for the proper disposal of the environmental waste and further, the contract has been signed by the dump around but no case regarding the damages has been mentioned (Dyreng and Markle, 2016). In the given report, no attention has been paid in concerned for the disposal of the waste material. The another aspect involving the conflict among the Jacqui and Barry under which the Jacqui was told to mind her own business and need to concern whether the company is the good citizen or not. The company has not been involved in paying good attention towards the environment. In accordance with the environment protection act 1994, it states that every company has the duty to protect the environment and if is not doing the same, then there are some offenses and penalties that need to be imposed off (Czerney, et. al., 2014). The main objective of this act is to safeguard the environment of the Queensland’ s environment that assist in improving the quality of life and maintains the future in such way that it will maintain the ecological process of which the life depends. The environment can be protected by suitable management program that needs to be in consistent with the ecologically sustainable development. Corporate social responsibility is the environmental concept that needs to care about the aspects related to the environment. The foremost duty of any company is to carry out the operations of the business in such way so that it will not result in harm the environment (Radebaugh, 2014).
The common principles that have been applied in the given case study comprised of the principle of the integrity as well as objectivity. In accordance with the principle of integrity, the individual need to be honest and hold the principle regarding the moral uprightness. The individual duty is to be consistent and adopt the ethical consideration. So the duty of the auditor is too faithful in the terms of the conducting the audit (Akadakpo and Izedonmi, 2013). MYH need to take into consideration regarding the responsibility for protecting the environment. Further, the contract has not been signed by the dump around and no point has been mentioned for the damages. This shows that there is lack of objectivity in the given case problem and it is the duty of the auditor, to be honest in regard to conducting of their work. The auditor needs to concern for the environmental issues and must consult with the other partner regarding any issue that must be involved with the environment (Güney and Bozkurt, 2012).
In the given case study, various alternatives are available in concerned of the Jacqui leak. In accordance with the corporation act, necessary actions can be taken in against the obligation for not performing the duty regarding the protection of the environment. In accordance with the code of ethics that needs to be followed keeping in mind the ethical principles that need to be followed so that no threat has been caused to the business. As per the Section 110 of APES, it imposes a statutory obligation on all the members to conduct the business in a professional manner (Musbah, et. al., 2016).
The auditor Jacqui is right on her part regarding the conduct of the issue of the environment. He was well aware of the fact that dump around will not contain the provision in respect of the damages. Further, a company has not been taken effective action for the purpose of disposing of the waste material. The authorities are not taken effective steps for the dumping of waste material after the warning assigned by the auditor in regard to the concern for the environment (Clayton and Staden, 2015).
If the company will not follow the environmental concerns regarding the dumping of the waste material, then legal actions will be taken for the company and it will affect the image of the auditor and affect the goodwill of the company. The environment will also get affected and it will result in causing serious violation for the company and some legal liability will also be there on the managerial person involved within.
Jacqui has been taken into consideration about the effective steps that need to be followed for the protection of the environment. As the senior audit of the MYH, it is the responsibility of the auditor to tell the company about any issues faced by the company in the future course of action. It is the responsibility of the auditor to take concern regarding the issue of the environment (Henderson, et. al., 2015).
In the given case study, the report has been prepared that will be submitted to the managing partners of the MYH regarding the case of negligence that has been brought out by Oasis against the MYH.
Miller Yates Howarth has been medium size firm in accordance with the national standards. It is considered as second largest firm in the entire Australia. The majority of its clients are currently facing too much pressure through competition factors and other related factors. One of its clients Morgan Fertilizers has been reported to carry the high amount of inventory on the balance sheet of the company during the time when the offer for the takeover has been made by the Oasis limited. After completed two months of the successful turnover, it has been analyzed that the inventory shown on the balance sheet of Morgan Fertilizers were overvalued and do not possess the exact amount of the inventory that needs to be claimed at the time of conducting the audit (Jaber, et. al., 2016). Later on, it was discovered that MYH will not consider all the stocks of the company at the end of the year. It has been estimated that 50% of the turnover of the company is held at the Bathurst facility and that is the inventory that has not been existing. The inventory that has been placed at the Tamworth is considered to be overvalued by 35%. It has been further estimated that MYH has been correctly verified the Tamworth stock and accepted the valuation of the management and does not take into consideration the account for the obsolescence. Further, it has been discussed that MYH needs to face pressure by Morgan fertilizers to complete the overall audit within 1 month and they have been undertaking the audit from the last few years and no previous misstatements have been done by the company (Kachelmeier, et. al., 2014).
In accordance with the auditing standard ASA 240, that deals in connection with the responsibility of the audit in regard to the financial report. As per the auditing standard 700 that will form an opinion in regard to the financial report requires the auditor report must include the separate section over the responsibility of the auditor in regard to the audit of the financial report. As per the section 130 (1) of the APESB which majorly states that care must be required while rendering any kind of professional capacity services to the clients. The practices that may affect the professional capacity must be avoided. The auditing needs to be done in quite a professional manner and any issues if identified will report back to the management of the company. The law of tort and law of contract will govern the provisions in regard to the negligence that has been taken into consideration for the breach in regard to the duty of care (DeZoort and Harrison, 2016).
In the case study related with Caparo Industries plc v Dickman, the auditor will remain liable to the parties other than the client of the audit. The auditor holds the responsibility in relation to the client of audit only. Under the approach related to the Privity test, the auditor will own some duty towards the plaintiff regarding the duty of care. It has been concluded that no liability has been available in consideration to the third party (Gimbar, et. al., 2016). Apart from the privity test, some liability has been existing in relation to third parties and there has been may test that has been existing in relation to the duty of care. There are a number of factors that need to be taken into consideration for ascertaining the liability in relation to care by using the use of the financial statement and actual knowledge in regard to the financial statement. The main duty of the auditor is to reasonable steps while carrying out the process of audit. In regard to the decision in concerned with the third party, Oasis has been done the takeover of the company by overlooking the financial statements only. The claim of the Oasis in regard to the negligence that has been done towards the company has been majorly depending on the rule of the proximity of the relationship of both (Grenier, et. al., 2015).
The case in regard to the reasonable forecast is reflected in the case Scott Group Ltd v Macfarlane under which the defendant Macfarlane will audit the accounts of the company and some error have been committed in the consolidation of the accounts and the defendant was aware of such negligence and did not investigate further.
The foremost duty of the auditor is to carry out the obligations in the required manner and render some professional advice to the clients. In accordance with the section 50, relevant rules and legislation in regard to the conduct of the audit have been applied that will affect the conduct of its profession. The auditor needs to comply with all the auditing standards of the accounting and then conduct the audit in a requisite manner and failure to comply with the auditing standard will attract the penal provisions. In the given case scenario, MYH has completed the audit within 1 month due to the pressure faced by Morgan fertilizers. MYH has completed audit from the last few months and no fraud has been committed in relation thereto. Due to this fact, they conduct the breach of the duty to take care of the financial statements of the company (Botez, 2015).
In the given case scenario, the auditor needs to conduct the audit related to the financial statements of the company in a finite manner. They need to take into consideration every detail about the accounts of the company and then audit it in the proper manner.
From the above report, it has been concluded that proper accounting standards must be followed while complying with the ethical standards of the company. The accounts of the company need to be supervised by the auditor and every minute details need to checked by the auditor and follow the proper standards.
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