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QUESTION $1(30$ marks$)$

You are the Training Manager for Brown and Co Inc $($Brown$).$ The following issues were

brought to you by Trainees, Managers, and Partners of Brown as examples of what they

experience on their audits. You will use these examples to develop an Ethics training

course to prepare the auditors of Brown on how to address these challenges when they

arise during the audits.

Issue Number One

Peter Ndoro, one of Brown$$s Partners, is very excited as he has been asked by one of his

clients, Waylon $($Pty$)$ Ltd$,$ to negotiate for the sale of Waylon $($Pty$)$ Ltd$.$ It is an honour for

Peter Ndoro but he is uncertain if he is allowed to do this. Peter Ndoro is requesting

approval from the rest of Brown$$s Partners to give him the go$-$ahead to negotiate the

Waylon $($Pty$)$ Ltd sale.

Issue Number Two

The Financial Director of Bison Films $($Pty$)$ Ltd informed Mr$.$ Oerson, one of the Audit

Partners of Brown, who is the Engagement Partner on the audit of Bison Films $($Pty$)$ Ltd

that unless the audit fee is reduced by $30\%,$ Brown$$s will be removed as the auditor of

Bison Films $($Pty$)$ Ltd$.$ Mr$.$ Oerso requested the Trainee to adjust the audit budget to

reflect the $30\%$ discount on the Bison Films $($Pty$)$ Ltd audit fee. The Trainee believes that

this is not allowed. The Trainee is requesting your help in determining if this would be

allowed under the SAICA Code of Professional Conduct.

Issue Number Three

One of the Trainees $($Jakes$)$ of Brown$$s is on the audit of Matco $($Pty$)$ Ltd $($Matco$).$ The

Financial Director of Matco is very aggressive, domineering, and dismissive of the audit

function and the audit team. Jakes is very unhappy about this and brought this issue to

the attention of one of the Audit Partners of Brown$$s to resolve as he has no idea how to

handle it$.$

$3$ HAUD$230-1-$Jan$-$Jun$2024-$SA$1-$MK$-$V$2-09112023$

Issue Number Four

Pam Enderson, The Audit Manager on the audit of KVV $($Pty$)$ Ltd$,$ a company selling wine

in all nine provinces, is getting married to the Financial Director of KVV $($Pty$)$ Ltd$.$ Since

they are getting married after the audit has started, Pam Enderson feels that she has

always done her audits with pride, and there is no reason for any concerns. She is very

happy that she will be working with her husband on the audit as she can save on travel

costs and drive with her new husband to work.

Issue Number Five

Ennie Lennox, The Audit Manager on the audit of Crown and Glow Jewellery company.

$($Crown$).$ Ennie knows everything about this client and has to sign off all the working

papers before it is given to the Audit Partner as a final sign$-$off. She applied for a highly

paid position at Crown and just heard the awesome news that she got the job. She was

told by Crown from the start of the audit already that she was going to get the job due to

her accommodating nature in past audits.

REQUIRED:

In terms of the SAICA Code of Professional Conduct provide the possible threats to the

fundamental principles listed above. Discuss this in detail making sure that all required

principles are listed and remedies on how to address these threats.

Description

of issue

Is this a threat, if

yes, what type of

threat

What fundamental

principles does this

threaten and what

reasons

How can this threat

be prevented or

mitigated

$1.$ XXX XXX XXX XXX

$(5$ x $6$ marks$)$

$4$ HAUD$230-1-$Jan$-$Jun$2024-$SA$1-$MK$-$V$2-09112023$

Competency Framework References:

F$1\mathrm{.}4$ Ethical Principles

a$)$ Advise, from an ethical perspective, on the conduct and

practices of a firm and its staff involved in the rendering

of assurance engagements $($codes of ethics and other

professional and legal requirements$)$

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