Welcome to our Presentation

HKSA Case Competition

Comprehensive Review on Ethical Dilemma in A&P

Presentation Flow

Introduction of Core Principles

Analysis and Recommendations of Ethical Issues

Conclusion

PART I: Non-Compliance Acts

Investigation by ICAC

PART II: Conflict of Interests

Undue Dependence

Core Principles (SAS 100 para. 6)

Confidentiality

Objectivity

Independence

Issue 1 : Suspected non-compliance

Comparing Cost Reports and Tender Estimates

Overstatement in labor costs

?

???

?

?

Recommendations

Discovery of suspected non-complianceDiscovery of suspected non-compliance

Collect & examine audit evidence

Check financial statements- Real figures reported?

Check financial statements- Real figures reported?

Document thefindings

Document thefindings

Discuss with Management

Discuss with Management

Suggest remedial actions

Suggest remedial actions

Non-compliance acts

Report to senior management

Report to audit committee

Report to Clients

Involve senior management

Do not involve senior

management

Internal Control Memorandum

Internal Control Memorandum

Evidence of suspected acts

Evaluation of risk exposure

Recommendations for remedial actions

Audit Report

Audit Opinion

Materiality of non-compliance

Effect on whole financial

statement

Quality and reliability of

evidence

Remedial action of management

WITHDRAWAL of ENGAGEMENT?

LAST RESORTSAS 600(42)

Issue 2 : ICAC Investigation

Client’s information for investigation

Duty of a citizen

Duty of an auditor

Bribery?

Recommendation (SPE 1.204B)

Clients

Lack of authority of David’s investigation

Alan should NOT disclose CE’s information

Duty of confidence owed to clients

Remaining Issues

Robin’s son

HT

Robin

Robin’s wife

Susan

CE

Issue 3 : Independence

Alan, Manager-in-Charge

CE HT

Recommendation

Manager-in-Charge

Member Member Member

Manager-in-Charge

Member Member Member

CE’s project:

HT’s project:

Issue 4: Undue Dependence

CE HT10% of A&P’s

revenueA & P

Susan

Recommendation (SPE 1.203(4))

Close monitor

15%

Revenue

Issue 5 : Robin’s Wife Investing

Robin’s wife

investing

Recommendation

Major shareholderMajor shareholder

Executive decision making

Confidential information of clients

Issue 6 : Tenancy Arrangement

A & P

Susan

Tenancy Agreement

normal course of business?

attractive rent?

SPE 1.203(34)

Issue 7 : HT Computer Project

SusanRobin’s son(Robinson)

Conclusion

Independence

Confidentiality

Objectivity

Integrity

Professionalism