Asic Case Study

1532 words - 7 pages

Topic 1: Ethics
(Code of Ethics for Professional Accountants)
Topic 1: Ethics
(Code of Ethics for Professional Accountants)

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Introduction
According to the Institute of Internal Auditors a Code of Ethics is a comprehensive statement of the values and principles, which should guide the daily work of auditors. The Code of Ethics states the principles and expectations governing the behavior of individuals and organizations in the conduct of internal auditing. It describes the minimum requirements for conduct, and behavioral expectations rather than specific activities.
Fundamental ...view middle of the document...

Ultimately, the purpose of the Code of Ethics is to promote an ethical culture in the profession of auditing and provides guidance to Auditors serving others.

Ethical Dilemma
An example of an ethical dilemma that could be faced is when an auditor is offered shares for a firm from a client. Along with this the auditor is still expected to work for the establishing firm doing the books considering they are quite familiar with the industry.
The standards and in the code of ethics state clearly that an auditor must remain an objective view therefore they must not allow personal feelings influence their professional judgement and they must remain unbiased. As an auditor is considered an independent body designed to evaluate and improve the organization’s operations they must therefore not have any direct financial interest in the client and should not make any investments with the audit firm. When individuals need to resolve ethical dilemmas it is important for employees to refer to their organization’s code of ethics in order to determine a clear picture of which decision is more in line with the company’s ethical commitments.

ASIC Case Study
(ASIC suspends former Banksia auditor for five years)
June 13th 2014

Background Information:
Banksia’s business model is similar to that of a bank. It borrowed money from the public by issuing debentures and then lent the funds to the public by financing residential and commercial mortgages. As at October 2012, Banksia had raised approximately $663 million from 15,622 investors.
However during late 2012, Banksia collapsed, which led ASIC to begin investigations as to why.
Mr. Sinnott was the lead auditor responsible for the audits of companies in the Banksia Group for the financial years 2009-2012.
Findings:
As a result of ASIC's investigation, ASIC formed the view that Mr. Sinnott did not conduct the audits in accordance with the Australian Auditing Standards as required of him under the Corporations Act 2001 (Corporations Act).

In relation to each audit ASIC formed the view that Mr Sinnott failed, among other things, to:
* perform sufficient audit procedures
* display an appropriate level of professional skepticism when auditing
* remain alert through the audits that the risk of the potential impairment of loan receivables may cast doubt over Banksia Group's ability to continue as a going concern
* take responsibility for the overall quality of the audits
* Appropriately conclude that he had obtained reasonable assurance to form an appropriate opinion on the financial report.
Actions:

As a result of their findings, ASIC accepted an enforceable undertaking from Mr. Warren John Sinnott. Under the EU, Mr. Sinnott is prevented from practicing as a registered auditor until the 11th of June 2019.

Also, Mr. Sinnott agreed, among other things, to:
* Participate in a further 10 hours of continuing professional development on audit methodology...

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