CPC- Ethical concerns

Question 1

Jack Snow, as a trainee accountant, must comply with the SAICA Code of
Professional Conduct (CPC).

Identification of threats to compliance to the fundamental principles:

There are several threats to the objectivity / independence of Jack Snow
regarding his position on the audit team which includes:

Familiarity threat because he is an alumnus of Uhesa.

Familiarity threat because he is a close friend of Jane Max, the Head of Student
Finance.

Self-interest threat because he still owes R38 000 in student debt.

Answer 1

3 Evaluation of the significance of the threats identified:

The fact that Jack Snow is an alumnus of Uhesa, does not make the threat
significant because he was only a student with no influence over Uhesa’s
financial department.

The fact that Jack Snow is a close friend of Jane Max, could make the threat
significant as she is the Head of Student Finance of Uhesa which puts her in
the position to exert significant influence

However, the threat is reduced due to Jack Snow’s position on the audit team
as he is only an audit trainee.

Question 2

The fact that Jack Snow still owes R38 000 in student debt which is also long
outstanding and 2 years overdue makes this significant from both a quantitative
and qualitative point of view.

Answer 2

Possible safeguards (actions that would have addressed my concerns) include:

Jack Snow should not be allowed to do any work relating to student debtors

Jack Snow’s work should be reviewed by an independent reviewer / reperforming the work to the extant necessary if he is still performing work on the
debtors section.

If this is not possible, the threat will be so significant that Jack should be
removed from the audit

Question 2

If it is true that Jack made the offer to overlook the inflated claim if his student
debt were written off, adherence to the following fundamental principles is
threatened:

• Integrity, as he is not straightforward and honest in his dealings;
• Confidentiality, as he is using information gathered during the course of the
  audit to his own advantage (to settle his debts);
• Professional behaviour, as his conduct discredits the auditing profession /
  brings the profession into disrepute.

Answer 2

I would propose the following:
* That the matter be investigated further to determine whether Dr Brown’s
allegations are true.
1
* If it appears that Dr Brown’s claims are true, disciplinary action be
instituted by the firm against Jack.

• SAICA be notified of the outcome of the disciplinary proceedings in case of a
  guilty verdict. (Bylaw 48-50).

NMM should review their quality control policies in terms of ISQM1 as this
seemed to have not been functioning properly as Jack should not have been
allocated to Uhesa’s audit.