Auditing Assurance Services in Australia Engines International Ltd

Question: Discuss about the Auditing Assurance Services in Australia for Engines International Ltd. Answer: Depicting what Should be Done by Jimmy Determining the Facts: After analysing the situation, certain facts have been identified by Jimmy, an unethical accounting system that is currently being used by Engines International Ltd (EI). In addition, the use of uncertain revenue recognising method has been pin pointed by Jimmy to its supervisors. Jimmy also pointed out that ASIC has investigated the revenue measure used by the Engines International Ltd (EI) and deemed it questionable. In addition, the senior audit partner is also justified that use of the questionable method, as it has been used in past 10 years. Moreover, the partner also depicts that Fitzgerald Milhouse Chartered Accountants might lose its client if accounting method is been questioned. Moreover, Jimmy mainly stated that it would accept the decision of the partner, but will include in audit working papers the dissenting statement. However, the audit partner states not to use the dissenting statement, whereas a letter acknowledging full responsibility for the audit is been provide d. Defining the Ethical Issues: The main unethical issue that is identified from the situation is the use of questionable method for recognising revenues conducted by Engines International Ltd (EI). The unethical measure used by EI could be identified from its books. The second unethical measure, which could be identified in the scenario, is between Jimmy and senior official. The senior official is actually ok with the shady accounting method used by the company and does not allow Jimmy to use dissenting statement in the audit report. Beasley (2015) mentioned that companies with the use of monetary offers are able to influence auditors for accommodating unethical measures in their audit report. The questionable method used by EI for recognising revenues has been authorised by senior auditor, which is unethical in part of the Fitzgerald Milhouse Chartered Accountants. The ignorance of report provided by ASIC and commencing with the overall audit report is an unethical approach conducted on part of FM charted accounting (Bobek, Hageman Radtke, 2015). Identifying the major Rules, Values, and Principles: There are relevant role, value, and principles, which could be identified from the situation. In addition, relevant principles, value, and rules mainly help the auditor to prepare the overall audit report of the company. However, the overall use of values and adequate rules could effectively help the auditor in making relevant assumption in its audit report. There are relevant principles, value, and rules, which auditors could use while preparing audit report of companies. Confidentiality: The auditor mainly needs to handle the confidentially of the accounts, which are prepared for the companies. However, there are certain exemptions, which are provided to the auditor for disclosing unethical accounting principles of the company (Haron, Ismail, Ibrahim Aw, 2014). The auditing values, rules and principles mainly states that auditors cannot disclose information of the company to any external party. However, in case of EI the auditor is not questioning the use of shady accounting system after getting the report of ASIC. In this particular scenario, Jimmy needs to ignore the confidentially principle and rule for acting based on values. Quality: The quality principle mainly states that auditors need to provide higher quality audit report with all the complied rules. In addition, the auditor is mainly complied to provide an ethical and quality audit report with shareholder and relevant authorities. However, the auditing firm and senior partner is not complying with the rules and regulations, as they have allowed EI to use the faulty accounting system (Hess, Haney MacPhail, 2017). Integrity: This principle mainly depicts that auditors need to account for honesty in their professional and business relationship. The overall honesty is not been conducted by Fitzgerald Milhouse Chartered Accountants and senior audit partner as they have allowed EI to use shady accounting method. Professional Competence: The professional competence of auditing partner and EI is relatively low as it does not follow the rules and regulations ethically. According to the professional competence, the company and its auditing partner must use viable accounting method in evaluating its financial report and revenues. This could allow the company to project its actual financial stability, while discarding any unethical measures. Kung Li (2013) argued that if companies are not able to generate the required probability hen unethical measures are used by management Specifying the Alternatives: There are two specific alternatives, which could be derived from the particular situation. Firstly, Jimmy could prepare the audit report and include the dissenting statement. Secondly, Jimmy could comply with the request, prepare the audit working paper without the dissenting statement in the audit working papers, and accept acknowledging letter from its auditing partner (Pickerd, Summers Wood, 2014). Comparing Alternatives and Values: The evaluation of alternative mainly depicts Jimmy to take adequate actions regarding the overall audit procedures conducted by the auditing firm and EI. The first option is the best alternative, which Jimmy should choose. Being an employee of Fitzgerald Milhouse Chartered Accountants, Jimmy should prepare the audit report with the dissenting statement, which could help in depicting the shady accounting system used by EI. Dissecting the consequence: There are two consequences, as Jimmy is provided by two options. Each option has a different consequence, whereas the adoption of first option could mainly hinder relations with the auditing partner or even make Fitzgerald Millhouse Chartered Accountants lose its largest client EI. However, it is only ethical, as ASIC has mainly pin pointed the shady accounting measures used by the company (Tian Peterson, 2016). The second alternative could mainly raise concerns for Jimmy, as the acknowledging letter will have no value when legal authorities gain knowledge on the unethical auditing report (Zadek, Evans Pruzan, 2013). Making Adequate Decision: Jimmy to ensure working with Fitzgerald Millhouse Chartered Accountants with adequate ethical measures must include dissenting statement in the audit working papers in EI annual audit report. This decision is mainly ethical and adequate according to the rule and regulations of American Accounting Association. Reference: Beasley, M. S. (2015).Auditing cases: An interactive learning approach. Prentice Hall. Bobek, D. D., Hageman, A. M., Radtke, R. R. (2015). The effects of professional role, decision context, and gender on the ethical decision making of public accounting professionals.Behavioral Research in Accounting,27(1), 55-78. Haron, H., Ismail, I., Ibrahim, D. N., Aw, L. N. (2014). Factors influencing ethical judgement of auditors in Malaysia.Malaysian Accounting Review,13(2), 47-86. Hess, D. J., Haney, M. H., MacPhail, C. S. (2017). 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