Question 1

On accepting the appointment, the auditor of the Games Limited, the following
ethical and legal factors should be considered. A code of ethics is important and useful in the for
the profession of internal auditing of company’s accounts. The code of ethics helps the auditor to
achieve the auditing objectives of the firm in risk control and management and the quality
assurance of the company’s accounts. The roles should be well defined so that there is no
asymmetry information regarding the code of conduct on the ethical issues of the company.

On the legal framework, the auditor should consider the completeness of the
company. This should include the competency and the independence of the company that allows
the auditors to perform their task effectively and the level of the asset risks and how the risks can
be mitigated. The other factors to be considered includes the financial stability of the company,
the management integrity and transparency. This would help the auditors have the independence
freedom on performing the auditor’s roles.

The auditor should perform a thorough research and investigations on the legal,
ethical and other factors mentioned above before taking the role of the auditor in the Gaming
company. The risk associated with such appointment should be manageable to make the
appointment a success.

Question 2

a)

The other possible ways to mitigate the cash flow difficulties to maintain
financial stability in the Z Pty Ltd are reduce the rate at which the company is spending, use a
monthly business budget and stretching out payables. These conditions will fix the financial cash
flow problems and increase the financial stability in the company.

b)

The evidence on mitigating factors above should be a key consideration in fixing

the financial cash flows of the company. Reducing the spending of the company on nonessential
activities can help audit the overhead accounts such as utilities and rent. This definitely increases
the financial cash low of the company. On considering of the stretching of the payables the
company can choose to pay certain expenses past the due date. This will help the company have
a short term cheap financing to help solve the financial constraints. Applying the use of monthly
business budget, helps the business to have a prediction model in which there are cycles that a
company cycles follow. The company can have enough savings to cater for the future trends in
which there is poor performance. The high revenue months should have should cater for low
revenue months to solve the case of cash flow struggles within the company.

References;

Moizer, P. (1995). An ethical approach to the choices faced by auditors. Critical Perspectives on

Accounting, 6(5), 415-431.

Shaub, M. K., & Braun, R. L. (2014). Call of duty: A framework for auditors’ ethical decisions.
In Accounting for the Public Interest (pp. 3-25). Springer, Dordrecht.

Stein, J. C., Usher, S. E., LaGattuta, D., & Youngen, J. (2001). A comparables approach to
measuring cashflow‐at‐risk for non‐financial firms. Journal of Applied Corporate
Finance, 13(4), 100-109.