Case A - Report

Value: 15%

Due Date: 19-Aug-2018

Return Date: 07-Sep-2018

Length: 2000 words

Submission method options: Alternativesubmission method

Task

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Background:

You a member of the audit team at Miller Yates Howarth (MYH), anaccounting firm with offices throughout the major regional centresof NSW and Queensland. Although a medium sized firm by nationalstandards, MYH is the second largest regional accounting firm inAustralia. Most of MYH’s audit clients are in the agriculture,mining, manufacturing and property industries. All those industriesare currently under pressure, either from a downturn in commodityprices or fierce competition from overseas competitors. MYH havenow been appointed auditors of a community bank. Two auditdirectors have previous experience auditing in the banking sectorand need to raise the awareness of staff with respect to thegovernance issues that have recently impacted the bankingsector.

Question 1 (7%)

Required:

You have been asked to:

read audit standard ASA315 focusing on audit responsibility withrespect to client governance,

read the web page on the ASIC report on the Commonwealth bankwhich details the governance issues raised by ASIC(http://www.apra.gov.au/MediaReleases/Pages/18_17.aspx), and

prepare a report that:

summarises and justifies the auditor’s responsibility to reviewthe governance of an audit client, and

Includes a table for use in the audit which explains the impactof each of the ASIC identified Commonwealth Bank governance issueson audit risk. The table should further explain why each of theASIC recommendations would reduce audit risk. The template belowshould be used.

Issue	Impact on raising audit risk	Recommendation	Reduction in audit risk because of therecommendation

Question 2 (3%)

David Little is a senor working at MYH and is part of a 3-personteam working on a client’s material loan application that needs tobe finished and delivered to the partner on Monday morning. Theteam are working all weekend to get it finished. There is a strongincentive for the team members, as a well prepared and successfulapplication will ensure that this major client is retained withinthe firm and raise the standing of the team members in the firm. OnSunday morning, one of the team, John, calls in sick. The rest ofthe team work harder and get the job done. When David get homeexhausted on Sunday night, his flatmate says, “I saw John and hisgirlfriend at that new restaurant in town today, I thought he wasworking in your team.”

What should David do? David doesn't think that it is fair ifJohn gets the same kudos as the rest of the team when he did notput in the same amount of effort but he is David's friend. Davidand John play on the same touch football team and often spend timewith each other after work and at weekends. Should David tell thepartner or are there other options?

Required:

Outline the ethical issues and your decision using the AmericanAccounting Association decision model. Use the following templateto guide your answer:

American Accounting Association Model	Decision making process
1. Determine the facts	The facts are ...
2. Define the ethical issues
3. Identify the major principles, rules and values
4. Specify the alternatives
5. Compare values and alternatives
6. Assess the consequences
7. Make your decision

Question 3 (3%)

Required:

Explain the role that incorporation of auditors and a statutorycap on auditors’ liability have on the limitation of auditors’liability.

Rationale