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Two Accounting Problems




Question;Question 1;Elise Dallimore is the partner in charge of the audit of;Hertenstein Ltd, a large listed public company. Elise took over the audit from;Marjorie Platt, who has recently retired from the audit firm. Marjorie was a;very experienced auditor and the author of several reports into ethical;standards in business, but Elise did not regard her highly for her ability to;grow non? audit service fee revenue. Elise sees an opportunity to increase the;provision of non?audit services to Hertenstein Ltd and thus increase her;reputation within the audit firm.;a. Comment on Elise?s belief that increasing non?audit;service fee revenue from her audit client would increase her reputation in the;audit firm.;b. Which;non?audit services would;you advise Elise;to avoid trying;to sell to Hertenstein Ltd because of the potential;ethical issues for the audit firm?;c. Would I make any difference to your answers if;Hertenstein Ltd was a proprietary company, not a listed public company?;Question 2;Ajax Ltd is a listed company and a new client of Delaware;Partners, a medium?sized audit firm. Jeffrey Rush is the engagement partner on;the audit and has asked the members of the audit team to commence the process;of gaining an understanding of the client, in accordance with ASA;315. One audit;manager is leading;the group investigating the;industry and economic effects.;And another is helping Jeffrey consider issues at the entity level. Jeffrey is holding;discussions with members of the audit committee and his talks will cover a wide;range of issues, including the ASX Corporate Governance Council?s Corporate;governance principles and recommendations. He has a meeting arranged for next;week with the four members of the audit committee, is an independent director.;Based on the above information, can you conclude that Ajax;Ltd complies with Principle 4 of the;ASX Corporate Governance;Council?s Corporate governance;principles and recommendations?;Explain.


Paper#40504 | Written in 18-Jul-2015

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