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Case 2 - APES 110 (20 marks) Maximum 1000 words?

John Jones is a senior audit partner in a local audit firm and is planning to retire in 12 months time. He is well respected by a number of his clients and as a result has been offered a position on the board of ABC Pty Ltd (a listed company), to take effect immediately earning him fees of $20,000 plus 2000 shares (2% of the company's total shares). Furthermore, as a way of introducing him to the other members of the board they have agreed to pay his air fares and accommodation to the next board meeting to be held in 2 months. Currently the audit firm provides other financial services such as taxation and IT consulting for the general accounting software, legal services and employs a number of recently qualified accountants to assist in collecting data for an audit and to provide bookkeeping services for preparing the financial report. Also, various clients engage the auditing firm to provide valuation services for assets that form part of the financial report and give advice on what board recommendations should be implemented. For example, the auditor is asked to provide advice on marketing strategy. It should be noted that while the accountants were completing work for the annual accounts they were under the direct control of the company management. It has also been agreed with the other partners in the audit firm that John Jones will be paid a bonus on retirement if he can grow his client base by 25% in the 12 months leading up to his retirement. In order to achieve this John was engaged in an extensive advertising campaign where he offered all prospective clients different auditing packages which depended on how much the client was willing to pay for the audit. In order to secure a new client that would bring in an additional 20% of total fees for the firm, the client was offered a separate proposal, this being extended payment terms for paying the audit fee and an agreement that the time for auditing the accounts would not exceed three weeks. Required 1.Identify any professional standards and regulatory requirements that may have been breached. Make special reference to factors affecting auditor independence. 2.What action should John Jones take to avoid potential threats or risks to his objectivity?

Public Comments

1. john jones is a partner of an audit firm
2. let john do what ever he wants why r u worried its free world this happens everywhere if u r something special then definitely everyone would like to b attached with you