Identify the parties potentially affected by this audit and the fee plan proposed
Accounting code of ethics guides those in the profession to behave in a respectful, controlled and moral way. Clients need to have confidence in the business practices of professional accounting firms. A clear ethical code ensures that accountants practice a high standard of business that is exceptional in integrity and professionalism (Maughan, 2011).
According to Schreiber (2003), integrity is defined in Article III of the California Society of CPA’s code of Professional conduct as the quality from which the public trust derives and the bench march against which member must ultimately test all decisions.
The potential parties to be affected by this audit are Craig Thorne, the company he represents and in the long run Allnet Company.
The modernization of the rules governing the Independence of the Accounting Profession clearly states three (3) main areas covering the requirements for Auditors:
1. investments by auditors or their family members to their audit clients; 2. employment relationships between auditors or their family members and audit clients; and 3. the scope of services provided by audit firms to their audit clients Item # 3 speaks about the services provided by audit firms to their audit clients, the rule reiterate that an auditor cannot or should not accept a job that involves a “condition”, the fact that the proposed fee is based on reported profit, in that the higher the profit, the higher the fee, means that fundamental principles which are defined to guide accounting professionals would be compromised, that is, integrity, objectivity, professional competence and due care, confidentiality and professional behaviour are likely to be tested as Craig Thorne might be tempted to report a higher profit since it means a higher fee. Craig Thorne in his role as an auditor must avoid bias, conflict of interest...