Question

You are planning the audit of Digital Science Bhd (Digital) together with the Ethics Partner at Marty & Co Chartered Accountants. Digital manufactures and supplies a wide range of telecommunications equipment is considering floating its equity shares to the public on 1 March 2019. Recently your practice revenue had suffered due to COVID-19 lockdown. Your firm is considering purchasing some of the shares in Digital to boost Marty & Co’s worsening financial position.The year end of Digital is 30 June 2019.

Required

Discuss the ethical issue(s) identified in the planning meeting with the Ethics partner of Marty & Co, Chartered Accountants, concerning the audit of Digital.

Answer 1

Answer;

Since auditors are not allowed to purchase the shares of auditee copany.It is unethical as if you purchase the shares of auditee company as a audior there might be a conflict of interest.Auditor should be independent of auditee company.

Further it may rise to insider trading.Since auditors have sizable access to sensitive information within an organisation they can easily use it to their advantage for buying and selling shares or even passing on knowledge to competitors.