Decision Regarding a Proposed Audit
I will not allow the proposal that our company contracts the brother of one of our partners as our firm’s auditor. In the contemporary business partnership environment, many irregularities are bound to occur with regard to financial profits disclosure. Hence, to prevent such incidents it would be important to uphold competent ethical perspectives. Auditors have been found to be capable of being exposed to potential threats on account of their independence when initiating an audit engagement (Houghton & Campbell 226). In this case, the brotherly relationship of the auditor to one of our partners puts the whole exercise in jeopardy, since this auditor is capable of manipulating the results towards his favor. “Moreover, a chartered accountant in practice shall be deemed guilty of professional misconduct under the Chartered Accountants Act, 1949, if he expresses his opinion on the financial statements of any enterprise in which he, his firm or a partner in his firm or any of his relatives has a substantial interest” (Gupta 480).
I would recommend that in order to perform a proficient audit or financial assessment of the company, it would be critical to contract a competent and independent auditor. In this case, in as much as the suggestion shows competency, we are not sure of the credibility with regard to independence. This suggests that it will be important to perform an independence test before signing agreement to an auditing contract with a chosen auditor. According to the proposed CLERP 9 Bill, “…if the circumstances exist…That: (a) impair, or might impair, the ability of the auditor, or professional member of the audit team, to exercise objective and impartial judgment in relation to conduct of an audit…would give a person with full knowledge of the facts and circumstances, reasonable grounds for concern…” (Houghton & Campbell 229). Hence, by performing an independence test we will be able to establish any affiliations that can affect credibility on account of ethical standards.