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UM Application of Reasonable and Informed Third Party Research Paper

University of Malaya

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Write an assignment, must be completed in accordance with the requirements in the Word,The assignment will be in a report format of not more than 2000 words. APA FORMAT

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COURSEWORK QUESTION Essay (20%) In 2018, the International Ethics Standards Board for Accountants® (IESBA®) released a completely rewritten and revamped Code of Ethics for professional accountants (PAs). It has been renamed to “International Code of Ethics for Professional Accountants (including International Independence Standards) (“the Code” or “the revised and restructured Code”). Some of the major changes included an enhanced conceptual framework, with the introduction of “reasonable and informed third-party test” (RITP) which believed to further strengthen auditor’s independence. Task assigned: Design a hypothetical case study which demonstrates the application of “reasonable and informed third-party test” in the context of financial statement audit. Include in your case study an evaluation of the significance of threats, followed by a proper safeguard plan to address the identified threats with reference to the revised code of ethics. (Total marks: 100) Note: Refer Appendix 1 for the remaining marks allocation. The total marks for this assignment are 100%, but it carries 20% of overall assessment for this module. * The detailed marking criteria’s for the allocation of 100 marks is provided in Appendix 1 Specific requirements: You must present your work in THREE (3) sections as follows: 1) Background of the company (20%) You, as one of the audit managers of BWC International Cooperative, has been assigned to lead the audit of a public listed company which based in Malaysia since 1998. According to the policy of BWC, all audit staffs must strictly adhere to the professional ethical standards of the International Ethics Standards Board for Accountants (IESBA). Failure to comply with the standard may result in disciplinary and/or legal action. However, it appears that many of your subordinates are not aware or unsure about the recent changes in the IESBA’s code of ethics (2018). Thus, your role as their leader becomes particularly critical in ensuring that none of your team members, including yourself, are confronted with significant ethical dilemmas. In the preliminary stage of the audit, some of these issues have been reported to you by Albert (your subordinate) in the following structure: 1.1) A brief background of your assurance client’s company 1.2) 1.3) Ethical issue(s) (i) referring to Section 604, the IESBA’s code of ethics (2018) Ethical issue(s) (ii) referring to Section 606, the IESBA’s code of ethics (2018) You are required to elaborate on these issues by adopting the approach of narrative writing from the perspective of Albert. Do not include the analysis of these issues in this section. 2) Evaluation of the issues (40%) You are required to evaluate the implications/impacts of the ethical issues (section 1.2 & 1.3) on your independence as the external auditor of the company (section 1.1) in the context of the IESBA’s revised code of ethics. You must support your evaluation with empirical evidence reported in the journal articles preferably from the publisher of Elsevier1, Emerald2 or Taylor & Francis3; or professional journals such as articles issued by the CPA4, or the American Accounting Association 5 . Supporting your argument with unpublished journal articles are strictly prohibited. Further, do not include the recommendation for improvements in this section. 3) The plan (40%) According to one the policies of BWC, you must demonstrate how to apply the conceptual framework of the IESBA to deal with the ethical issues in your section 1 as follows: 3.1) Identifying the threat to independence Discuss the potential threat(s) to independence in connection to the ethical issues as in section 1.2 & 1.3. Further, elaborate on how these ethical issues affect the external auditor’s professional scepticism and compliance with the fundamental principles. 3.2) Evaluating the significance of the threat Ascertain if the identified threat is at an “acceptable level” as per the IESBA’s revised code of ethics using the “reasonable and informed third party test”. Highlight the factors that are relevant in evaluating the level of threats to compliance with the fundamental principles. 3.3) Safeguards Propose safeguard in addressing the threats identified above and evaluate if the safeguards will eliminate those threats or reduce them to an acceptable level using the reasonable and informed third party test. 1 https://www.elsevier.com/en-xs https://www.emerald.com/insight/ 3 https://taylorandfrancis.com/ 4 https://www.cpajournal.com/articles/ 5 https://aaahq.org/ 2 3.4) Audit plan You are also required to illustrate how the identified threats to independence affects your preliminary judgement on materiality in connection with your assurance engagement. On another note, you must support your demonstration in section 3.1 – 3.3 by citing the specific section or subsection of the code of ethics in the following form, for example: “The professional accountant shall apply the conceptual framework to identify, evaluate and address threats to compliance with the fundamental principles.” (Code of ethics for professional accountants, 2018., r. 120.4) LENGTH REQUIRED 2000 words +/- 10%. Any deviation from this will be penalized. FORMATTING AND LAYOUT • • • • • • A Microsoft Office Word Document or other relevant applications as permitted by module lecturer/ typed using computer. Usage of typewriter or hand - written is STRICTLY not allowed. 12 font size, Time New Roman font and bold title and sub titles A4 sized paper Fully justified alignment 1½ line spacing Margins of 1” at top and bottom; left and right Appendix 1: Marking Criteria for Essay (20%) No. Sections Others Assessment Criteria Design a case study which comprehensively includes the required elements with proper examples, followed by the formulation of sound safeguard and audit plan addressing the identified problems. Presentation of the analysis: • Appropriate citation and references. • Style and readability including proper organization of answers. • Overall presentation. • This coursework must have a Cover Sheet, Table of Content and Page Number and Proper Heading/Title for each part answered, list of references (Use any referencing system that is suggested by the faculty) Weightage 90% 2% 2% 2% 4% Total marks 100% Overall Marks 20% Marks Allotted by Lecturer ...
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APPLICATION OF REASONABLE AND INFORMED THIRD-PARTY TEST

Application of Reasonable and Informed Third-Party Test
Student’s Name:
Institutional Affiliation:

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APPLICATION OF REASONABLE AND INFORMED THIRD-PARTY TEST

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TABLE OF CONTENTS
Cover page…………………………………………………………………………..................…1
Table of Contents…………………………………………………………………………………2
Application of Reasonable and Informed Third-Party Test……………………………………....3
Background of the company………………………………………………………...……………3
A brief background of your assurance client’s company…………………………………...…….3
Ethical issue(s) (i) referring to Section 604, the IESBA’s code of ethics (2018)……………..….3
Ethical issue(s) (ii) referring to Section 606, the IESBA’s code of ethics (2018)…………..……4
Evaluation of the issues………………………………………………………………………...…4
The Plan………………………………………………………………………………………...…5
Identifying the threat to independence.....................................................................................…...5
Evaluating the significance of the threat………………………………………………………….6
Safeguards………………………………………………………………………………………...7
Audit Plan…………………………………………………………………………………………8
Reference…………………………………………………………………………………..…….10

APPLICATION OF REASONABLE AND INFORMED THIRD-PARTY TEST

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Application of Reasonable and Informed Third-Party Test
1) Background of the company
1.1)

A brief background of your assurance client’s company.

BWC International Cooperative is a company of good reputation with over twenty one years of
experience in matters professional accountancy and auditing. The following are the major services
offered by BWC international Cooperative Company;
i.

Validating of financial statements of a company as either accurate or not.

ii.

Express opinions on financial transactions and methods.

iii.

Obtain reasonable assurance that the financial statements are free from interference.

iv.

Protecting the shareholders from false financial reporting.

v.

Monitor company systems and procedures if they conform to the law

1.2)

Ethical issue(s) (i) referring to Section 604, the IESBA’s code of ethics (2018)

According to IESBA’s code of ethic (2018) section 604 which states threats related to tax services.
The following are considered threats on all audit clients on requirements and application material
by IESBA’s code of ethics (2018) to an audit firm;
i.

Tax return preparation -This does not necessarily generate a threat, it involves
assisting clients with their obligated tax reporting, drafting and compiling details.
It is a responsible nature of the auditor to advice the client o...

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