CUSSION QUESTIONS AND PROBLEMS BTES s-3) The following are five independent scen
ID: 2327996 • Letter: C
Question
CUSSION QUESTIONS AND PROBLEMS BTES s-3) The following are five independent scenarios it is one of the partners of a Certified Accountants firm Biscuits and Cream. Buscuits and Cream operate as a partnership in lasow. Sarah Cream,his other ner was convicted of manipu holders of Red Bean are suing the firm. Will Alex be liable to the lawsuit in a capacity? Explain. The Inland Revenue Board has found the directors of Pian Lang Berthad guilty of tax evasion. Pian Lang kept two sets of contradictory accounts and docum One set of accounts and documentation was presented to the auditors Gong Chartered Accountants and subsequently the Inland Revenue Board for their desk audit. The other version, which was the correct version, was hidden from the auditors and the tax authorities. Will Gong Gong Chartered Accountants be liable for the audit failure of Pian Lang Berhad. Explain. part- udit of Red Bean Ltd.The share lating the results of the a Gong 3. The shareholders of Cyberliterate are suing the firm Tak Fa Ham & Associates for negligence. The audits of Cyberliterate was performed by an audit junior who was not competent using Microsoft Excel. The audit partner Mr Tak did not review the work of his junior thoroughly. The audited financial statements were erroneous and were a subject of ridicule during the annual general meeting by the members. 4 The firm Ram Chartered Accountants has received a letter from the Income Tax Department requesting that the accountants cooperate in a money laundering case invo- ing the directors of Ponyo Pte. Ltd. Ram Chartered Accountants has refused to respond. alleging that the audit files are considered privileged between the firm and its chent.Explanation / Answer
A partnership does not have a separate legal identity of its own different from its partners thus, the partners are personally liable for the actions of the partnership. In this case Alex is one of the partners of Biscuit and Cream firm. The actions of the partners will bind the partners in their personal capacity as well as in their capacity as partners. However, the action of one partner will not bind the other partner in his personal capacity. Thus, in this case since it was the actions of Sarah that led to the filing of lawsuit against the partnership by the shareholders of Red Bean thus, Alex is not personally liable in the lawsuit. The auditors are expected to conduct audit in accordance with the auditing standards of companies. If an auditor fail to discharge his or her duties as auditors then he or she will be held liable for negligence of duty. However, the auditors will audit the accounts and documents provided to them by the management. Thus, in case the management provides wrong of set of accounts and documents then as long as the auditor conducts audit as man ordinary prudence would do then he will not be held liable. On this case also the chartered accountant Gong Gong will not be held liable for the audit failure assuming that the auditors have conducted the audit in accordance with the appropriate auditing standards and have not discharged his duties negligently. . Cyberliterate will be successful in the case against the firm Ham & Associates as the senior partner of the firm was negligent in discharging his duties as the auditor of the company. Not only the firm sent an audit junior who has no knowledge in Microsoft excel but also didn’t even reviewed the work of the audit junior. Ram Chartered Accountants have to cooperate with Income Tax Department as the case involves money laundering by breaching the provisions of law. It is true that the files a chartered firm hold for the clients is confidential property however, in case the legal statue allows the chartered firm to disclose information about its clients in case there is breach of law by a client. Though the shares of Cancerfree are not quoted in a recognized stock exchange however, such shares should have been valued at cost and should have been included in the books of accounts. Thus, the unhappiness of the client for not including the investments in the shares of Cancerfree is justified.