Question

The following scenarios may result in non-compliance with one or more of the principles in the code of ethics, by the auditor or accountant.

Case 1: Adi is a chartered accountant who is employed by a state owned enterprise, appeared before a commission of enquiry into financial irregularities that occurred under his direction. Adi denied his involvement but there was proof made available which indicated he was lying. Adi acknowledged that he had lied and then went on to state that he was instructed to do so by his superiors.
Case 2: Thando attended and gave a speech at a private dinner for Sharons birthday who is the financial director of a company that is a major client of the audit firm that Thando works at. Thando is in charge of the audit that is being performed at Shannon's company and they have been close friends for almost five years.
Case 3: Asanda is a registered auditor who is in charge of several audits at the audit firm in which she is employed. Asanda is very hardworking and competent. She, however, refuses to have any male members on her audit team as she believes that female team members are more professional and competent as compared to male team members.
Case 4: Preneshan is the registered auditor in charge of the audit of Dribble Drabble (Pty) Ltd, he charged the client a fee for audit procedures which he knew had not actually been carried out.
Case 5: The financial director of Thirsty Ltd, a juice company, has made an offer to the audit team to take them on a weekend trip to a safari with all expenses paid for, which will become an event that occurs on a yearly basis should all audit deadlines be met annually.
Case 6: Ben Benjamin a registered auditor, arranged with some of his clients to pay the fees which he charged for his services in cash. Any client agreeing to do so was not charged VAT and was given a substantial discount
Required: Discuss if the chartered accountants or registered auditors in each of the scenarios above, have failed to comply with any of the fundamental ethical principles in the code of conduct.

Answer 1

In these scenarios, the accountants and auditors violated ethical principles in different ways. They include lying, personal relationships with clients, gender discrimination, charging for non-performed procedures, offering incentives for meeting deadlines, and accepting cash payments. Such actions compromise integrity, independence, objectivity, professionalism, and fairness.

Step-by-step explanation:

In Case 1, Adi, the chartered accountant, fails to comply with the ethical principle of integrity by lying about his involvement in financial irregularities. Even though he claims he was instructed to lie by his superiors, he is still responsible for his own actions.

In Case 2, Thando, the auditor, violates the ethical principle of independence by attending a private dinner for a close friend who is a client. This personal relationship could compromise the objectivity and independence required for an audit.

In Case 3, Asanda, the registered auditor, violates the ethical principle of objectivity and non-discrimination by refusing to have male members on her audit team based on gender stereotypes. This discrimination undermines the professionalism and fairness required in the auditing profession.

In Case 4, Preneshan, the registered auditor, breaches the ethical principle of professional competence and due care by charging the client for audit procedures that were not actually carried out. This unethical behavior compromises the accuracy and reliability of the audit.

In Case 5, the financial director of Thirsty Ltd offers a trip to the audit team as an incentive for meeting audit deadlines. This violates the ethical principle of independence and objectivity, as it creates a potential conflict of interest and undermines the audit's integrity.

In Case 6, Ben Benjamin, a registered auditor, engages in unethical behavior by accepting cash payments for his services and providing discounts without charging VAT. This violates the ethical principle of professional behavior and integrity, as it involves tax evasion and undermines the trust and transparency in the auditing profession.