70.2K

Verified Solution

Link Copied!

QUESTION 2 (a) Mega Biggy Company is a long-standing client of F&P Audit Firm. During a final day of the companys audit, while following an audit trails on some cash payments, Anis Holland, a qualified professional accountant and a member of the audit team, discovered what she described to the audit partner, Zack Lewis as an irregularity. A large and material cash payment had been recorded with no recipient named. The corresponding invoice was handwritten on a scrap of paper and the signature was illegible. Zack Lewis was under pressure to finish the audit. He advised Anis Holland to seek an explanation from Francis Max, the clients finance director. Zack Lewis told that Mega Biggy Company was a long-standing client of F&P and he would be surprised if there was anything unethical or illegal about the payment. He said that he had personally been engaged in the Mega Biggy audit for the last ten years and it had always been without incident. In addition, the finance director, Francis Max was an old university-mate and that he was certain he would not approve anything irregular. Zack Lewis said that F&P had also done some consultancy for Mega Biggy Co. When Anis Holland sought an explanation from Francis Max, she was told that nobody could remember what the payment was for but that she had to recognise that real audits were sometimes a bit messy and that not all audit trails would end as she might like them to. He also reminded her that it was the last day and both the company and audit firm were under time-pressure to conclude and to get the audit signed off. When Anis Holland told Zack Lewis what Francis Max had said, Zack Lewis agreed not to get the audit signed off without Anis Hollands support, but warned her that she should be very certain that the irregularity was worth delaying the sign-off for. Anis Holland was in a dilemma whether to extend the audit or to sign off the audit by the end of the day. This dilemma may reflect her independence as a professional accountant.

Required: Explain the conflict between the role as an employee of F&P and role as a qualified professional accountant that Anis Holland is now experiencing.

10 marks

Answer & Explanation Solved by verified expert

See Answer