CPC- S250 Hospitality

Question 1

Attendance at the event by the auditors may create threats to independence:

Answer 1

Familiarity threat

due to the team attendance being seen as having a close relationship with DMG management and staff
(or the developing of such at these functions), which might have the audit team being too sympathetic to
their interests or too accepting of their work;

due the the team’s attendance can be seen as accepting gifts or preferential treatment from DMG, which
might have the audit team being too sympathetic to their interests or too accepting of their work;

Question 2

intimidation threat

Answer 2

• based on what the intention might be for DMG in inviting the audit team, which could deter the auditors
  from acting objectively because of actual or perceived pressures, including attempts to exercise undue
  influence over them

Question 3

Advocacy threat

Answer 3

due to the team’s attendance at the event may be seen to be endorsing the quality of DMG’s products

ANNA effect

Question 4

Considerations need to be given whether the hospitality (cocktail event invitation) is significant or trival
and inconsequential.

Answer 4

If considered significant, safeguard need to be applied to eliminate or reduce the risk to acceptable level,
if cannot be reduced/eliminated then such offer must not be accepted

Question 5

Disclosing client confidential information (Fundamental principles section 110)

Answer 5

Diana has not complied with the fundamental principle of Confidentiality:

 She shared private client information obtained during the conduct of the audit

 This she also did without the consent (permission) on the client

Question 6

Diana has not complied with the fundamental principle of Profesional Behaviour:

 Disclosing client information to 3rd parties could be seen as conduct that might discredit the
profession

Answer 6

Objectivity
Diana has not complied with the fundamental principle of Objectivity
 Her ‘excitement about the potential agreement’ and her ‘efforts help DMG to secure the agreement’
could be seen to advocate the clients business and could create threats to her independence

Question 7

ALWAYS ALWAYS

Answer 7

4 Accordingly it is clear that Diana did not follow the guidelines as set out by the SAICA Code and could
be found guilty of improper conduct (conclusion)