hksa hksa qp case competition team 28 presented by: the chinese university of hong kong chris lo...
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HK
SA
HKSA QP Case Competition Team 28
Presented by: The Chinese University of Hong Kong Chris Lo Colin Lau Raymond Chan Nicole Ng
Prospective Students Society
Qualification ProgrammeCase Analysis Competition 2002
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
AG
EN
DA
•Background•Ethical Issue•Action & Consequence•Recommendation•Conclusion
HKSA QP Case Competition Team 28
Background
BackgroundBackground Ethical IssueEthical Issue Action &Consequence
Action &Consequence RecommendationRecommendation ConclusionConclusion
HKSA QP Case Competition Team 28
Ethical Issue
Personal Loyalty
Personal Loyalty
Integrity, Objectivity and Independence•Statement 1.203
Integrity, Objectivity and Independence•Statement 1.203
Auditors’ Responsibility to
Fraud•SAS 110
Auditors’ Responsibility to
Fraud•SAS 110
Going Concern•SAS 130
Going Concern•SAS 130
BackgroundBackground Action &Consequence
Action &Consequence RecommendationRecommendation ConclusionConclusionEthical IssueEthical Issue
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? ?
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HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
Rejects Alfred’s request
RecommendationRecommendation ConclusionConclusionEthical IssueEthical IssueBackgroundAction &
Consequence
Action &Consequence
Action & Consequence
Accepts Alfred’s request
JamesGet good evaluation &further promotionBe found guilty
Beta’s potential investorsLikely discover hidden information
A&PKeep good relationship with BetaLikely be sued by investors
BetaGet listed on GEMFace risk of bubbles burst
Accepts Alfred’s request
The Profession&
the Societyare hurt
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
RejectsAlfred’s request
RecommendationRecommendation ConclusionConclusionEthical IssueEthical IssueBackgroundAction &
Consequence
Action &Consequence
Action & Consequence
Accepts Alfred’s request
Beta’s potential investorsThe general confidences of investors are kept
A&PLose client Reduce risk of being sued by stockholders
BetaApproach other auditors(opinion shopping)
JamesCan’t keep friendship Not being found criminal guilty
Rejects Alfred’s request
The Profession&
the Society
HKSA QP Case Competition Team 28
RecommendationRecommendation Ethical IssueEthical Issue Action &Consequence
Action &Consequence ConclusionConclusionRecommendationRecommendation
Recommendation
•Emphasize on:
–Conducting communication
–Insisting on our professional conduct
•Three Phases:
–Phase I – Communication
–Phase II – Insistence on profession
–Phase III – Withdrawal from the engagement
HKSA QP Case Competition Team 28
Continue the audit
proceduresRisk of snowball effects
Masking the truth is not equal to solving the problem
Disguise the fact now >> problem accumulate
Accumulated problem will explode sooner or later and lead to an uncontrollable financial disaster.
Suitability of IPO
Think about the current economic situation of HK
Think about the cost of IPO
Advise Alfred to think about other ways to collect fund
Reputation of the firm
If public discover that the statements are not presented in a true and fair way, they will lose their confidence on the company
Reputation is important for long term
Follow the request and Do not
disclose the fact
Reject the request of
Alfred
Communicate with clients explain with reasons
Not Accept
Accept
Insist on Profession
Accept
Not Accept
Withdrawal from the engagement
Loss one Customer now, but earn good
reputation in long termSeek advice from seniors and professional bodies
throughout the whole process,
Continue the audit
procedures
BackgroundBackground Ethical IssueEthical Issue Action &Consequence
Action &Consequence RecommendationRecommendation
Conclusion
ConclusionConclusion
• Whistle blower
• Recovery of Investors’ Confidence
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
Q&A
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
Thank You
HKSA QP Case Competition Team 28