Question

Auditing/Ethics

You are an audit partner in a Small CPA firm. One of the audit managers who works for you, Alan Robinson, has emailed you about a prospective audit client, Stanley Thornton, with whom he ahs been talking. Mr. Robinson is concerned because the prospective client has made it clear that if he hires your firm he will expect your firm to be his advocate and always act in his best interests. In other words, Mr. Thornton expects your firm to be in a relationship with him similar to the relationship he has with is attorney. Alan Robinson is a little uncomfortable with that expectation, but does not know how to respond. He is seeking advice. Reply to Mr. Robinson’s email advising him to discuss the necessity for independence in the audit, the broader responsibilities of a CPA firm, and how CPA firms differ from other professionals in that regard. Elaborate upon these issues, giving Mr. Robinson some ideas of how to explain them to Mr. Thornton.

Answer 1

The purpose of the audit is to provide an independent and fair opinion to the shareholders about the financial position of the company. So, it is imprtant that the audit should be conducted by independent party as there are chances of influence by the relationship of the company with the auditor. The auditors are expected to give an unbiased and honest professional opinion on the financial statements to the shareholders.

AICPA code of conduct explians the principles of professional conduct by a CPA. Respoiesnsibilities, public interest, integrity, objectivity and indeendnce and due care are those principles.

It is necessary to have an expert to get an unbaised, fair and honest opinion about the financial statements of the company for the shareholders.