1. Welcome to our Presentation
HKSA Case Competition
Welcome to our Presentation
Comprehensive Review on Ethical Dilemma in A&P

3. Presentation Flow Introduction of Core Principles
Analysis and Recommendations of Ethical Issues
PART I: Non-Compliance Acts
Investigation by ICAC
PART II: Conflict of Interests
Undue Dependence
Conclusion

4. Core Principles (SAS 100 para. 6)
Confidentiality
Objectivity
Independence

5. Issue 1 : Suspected non-compliance
Comparing Cost Reports and Tender Estimates ?
Overstatement in labor costs ?

6. Recommendations Discovery of suspected non-compliance
Collect & examine audit evidence
Check financial statements
- Real figures reported?
Document the
findings
Discuss with
Management
Suggest remedial
actions

7. Do not involve senior management Involve senior management
Report to Clients
Report to senior
management
Do not involve senior management
Non-compliance
acts
Report to
audit committee
Involve senior management

8. Internal Control Memorandum
Evidence of
suspected acts
Internal Control Memorandum
Evaluation of
risk exposure
Recommendations for
remedial actions

9. Audit Report Audit Opinion Materiality of non-compliance
Effect on whole financial statement
Remedial action of management
Audit Opinion
Quality and reliability of evidence

10. LAST RESORT WITHDRAWAL of ENGAGEMENT?
SAS 600(42)
WITHDRAWAL
of ENGAGEMENT?

11. Issue 2 : ICAC Investigation
Bribery?
Client’s information for investigation
Duty of
a citizen
an auditor

12. Recommendation (SPE 1.204B)
Duty of confidence owed to clients
Lack of authority of David’s investigation
Clients
Alan should NOT disclose CE’s information

13. Remaining Issues HT
Robin’s son
Robin CE
Robin’s wife
Susan

14. Issue 3 : Independence
Alan, Manager-in-Charge CE HT

15. Recommendation
CE’s project:
HT’s project:

16. Issue 4: Undue Dependence
Susan
10% of A&P’s
revenue
A & P CE HT

17. Recommendation (SPE 1.203(4))
Revenue
15%
Close monitor

18. Issue 5 : Robin’s Wife Investing

19. Executive decision making
Recommendation
Major shareholder
Confidential information of clients
Executive decision making

20. Issue 6 : Tenancy Arrangement
Susan
normal course of business?
attractive rent?
Tenancy Agreement
SPE 1.203(34)
A & P

21. Issue 7 : HT Computer Project
(Robinson)
Robin’s son
Susan

22. Conclusion Professionalism Independence Objectivity Confidentiality
Integrity