Sachin Jethani

M00470102
Coursework 3
Ethics basically describes a persons feelings on what is right or what is
wrong. Being ethical also mean doing what the law requires. The word was
originated from ethos which means nature of a person. It enlightens the
reasons on why or how a person completes a given duty. There has been a
drastic increase in the use of moral values or ethics in any profession. The
main objective or a goal to introduce ethics in a profession is to reduce any
risks or frauds. In the profession of audit, the trust only comes when the
auditor works without a commander to command him i.e. if he is
independent then it shows a better character to its clients. The regulatory
bodies of this profession have introduced ethical standards which try to
accomplish liberty, truthfulness and impartiality in this profession.
In the given example, Thomas who is an engagement partner of AXA audit is
an auditor for Richard Browne Clocks since 5 years. According to the
standard which emphasizes on freedom, a partner who is accountable for
Audit management and also ensuring quality of an audit report. Thomas
being an engagement partner gives rise to threats such as familiarity, self
assessment and prioritizing interests of his own. This may reduce the
independence factor in this profession. In order to prevent such situation,
Thomas should be rotated to another company and should not involve in
RBCs matter for at least a period of 5 years. The example also tells us that
Mark Robinson, a junior staff of the audit company and the team is son of the
Marketing director of RBC, Mark Robinson. According to the standards which
emphasize on impartiality there should be no personal relations between the
company and its auditing team. As explained above there is a personal
relationship between a Marketing director of the company and a member of
the audit team. This may give rise to threats such as favors in relationships ,
self benefit and acquaintance which can affect the auditors honesty and
liberty. In order to prevent these relations should be reported to the
management of both the firms. The management would then evaluate the
threats and would find an appropriate solution for it.
After completing the report, Nick Robinson gave an expensive traditional
Grandfathers clock to engagement partner as a present. This violates Ethical
Standards that emphasizes that any employee, member of the family in the

company or any influential persons who can change the final outcomes or
the process of an audit are prohibited to exchange gifts in audit profession.
This situation may give rise to threats such as acquaintances and prioritizing
interests of his own. If the gift is accepted by the audit company affects the
freedom and role of the auditor. Gifts can be exchanged between the audit
company and the organization if the value of the gift is irrelevant.
Additionally, two way air ticket and a 3 nights stay in a luxurious hotel was
gifted to the audit team by the managing director. This violates the ethical
standards which prohibits any type of generosity provided to the audit team
if it is too expensive and frequent. Thomas was hired by the finance manager
of RBC to act as an advisor on taxation related matters. He also demanded
that Billy, a senior audit staff, works as an advisor on taxation issues for 3
months. This violates ethical standards which emphasize on non audit
services i.e. an auditor can only provide services which are not related to
audit to the client if and only if this exchange of service is communicated to
the senior partner of an audit firm. The senior partner would evaluate the
risks associated with this exchange of service and would communicate this
issue to the audit committee and would take his decision in such a manner
that it would safeguards or minimizes the risks or threats.
An outstanding fee of 250 is to be received from Phil by next month.
According to Ethical Standards an auditors fee should be received by the
auditor before the next audit schedule. An intimidation threat arises if the fee
is not received by the auditor. This pressurizes the auditors i.e. the panic of
not receiving the fee. Due to this the auditor might not perform his duties in
a fair manner.
The main goal of introducing ethics in any profession is to prevent threats or
to minimize them as much as possible.