Case Study Aud610

Only available on StudyMode
  • Download(s) : 384
  • Published : June 21, 2012
Open Document
Text Preview
Question 1
Identify the situation that violated the MIA by Law and explain why?

According to Section 240.5 of Referral Fees and Commissions of MIA by Law, in certain circumstances, a professional accountant in public practice may receive a referral fee or commission in relating to a client. For example, where the professional accountant in public practice does not provide the specific service required, a fee may be received for referring a continuing client to another professional accountant in public practice or other expert. Accepting such a referral fee or commission creates a self-interest threats to objectivity and professional competence and due care. In this case, Amirul had accepted a certain percentage of the audit fee from Ariff because Amirul was the one who approached Ariff to undertake a financial statement audit of VCE Construction Work Sdn Bhd. For that reason, it violated Section 240.5 of MIA by Law because the money received by Amirul is evidently a referral fee. Thus, create a self-interest threats to objectivity and professional competence and due care to Ariff.

Section 130 of MIA by Law governs the Professional Competence and Due Care expected from professional accountant. Stated under Section 130.1 of MIA by Law, the principle of professional competence and due care imposes the following obligations on professional accountants, which are: (a) to maintain professional knowledge and skill at the level required to ensure that clients and employers receive competent professional service: and (b) to act diligently in accordance with applicable technical and professional standards when providing professional services. Likewise, Section 130.4 states that diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on timely basis. In this case, Ariff had abandoned his responsibility as the partner-in-charged because he is occupied with his construction company. As support, he seldom came in to the firm and will only come if he is needed to sign the Independent Auditors Report or he is having a meeting with potential and current clients. Moreover, 3 out of the 8 staffs that Ariff has are audit trainees and these trainees do not possess the professional knowledge and skill needed. We can conclude that Ariff did not maintain adequate professional competence and due care towards Deenurliz Wedding Planner Sdn Bhd, thus, violated Section 130.1 and Section 130.4 of MIA by Law. Additionally, according to Section 130.5 of MIA by Law, a professional accountant shall take reasonable steps to ensure that those working under the professional accountant’s authority in a professional capacity have appropriate training and supervision. Opposite to what is expected by Ariff as professional accountant, his staffs consist of only 8 people and 3 out of the 8 are only audit trainees. These trainees are leaving the firm very soon and will be replaced by fresh trainees that have prior training. What is more, the audit work are being led by 2 audit seniors and Ariff did not maintain proper supervision on them because Ariff will only review the working papers before signing the Independent Auditors Report. Thus, it violated Section 130.5 of MIA by Law.  Question 2

Indicate the elements of Quality Control of Engagement Level which are not adhered by Aiff Al-hakim & Associates.

There are six elements of Quality Control at Engagement level which are not adhered by Ariff Al-Hakim & Associates. The first element is leadership responsibilities for Quality. In this element indicates that the policies and procedures should be established to the designated engagement partner to every engagement to take overall quality of the audit assigned. The partner should also become the “role model” for the other team members and should always promote internal culture that stresses the important of audit quality. In this case, Ariff who is the audit firm owner should become...
tracking img