pUT SOME COURT OUTCOMES IN QUESTION 1 (JUST ONE OR TWO CASE OUTCOMES)
TASK Background You are an audit manager at Oscar Edwards Vance (OEV), an accounting firm with offices throughout regional Australia in major centres such as Bathurst, Goulburn, Coffs Harbour and Armidale in NSW, Warwick in Queensland and Bendigo in Victoria. OEV is a medium-sized auditing firm by national standards and most of its clients operate within the manufacturing and service industries. During early July 2019, you met with the audit senior of OEV, Jack Higgins, to discuss a range of findings related to various clients of OEV. Framed Ltd Framed Ltd was a wholesaler of office supplies that sold its products to retailers throughout NSW. Framed had only been breaking even for the last two financial years, with the management of cash flow being a significant issue. Despite the cash flow issues (Framed was often close to the limit on its bank overdraft) revenue had been reasonable. Receivables and payables however, had been creeping up. OEV completed their most recent audit and provided an unmodified opinion. Within a couple of months of year-end, Framed went into liquidation as it was unable to meet its debts. The liquidator of Framed subsequently discovered a major fraud carried out by two sales representatives of Framed who had been entering falsified sales in order to achieve their sales bonuses. Jack tells you that the audit work on sales and receivables was done by Neville, a junior member of the audit division and that sales and receivables had been materially overstated. Jack informs you that the liquidator of Framed is pursuing damages from OEV, claiming negligent conduct for not detecting the fraud. Jack also informs you that VicBank had extended the terms of their overdraft to Framed by relying on the audited financial statements and that they too are pursuing OEV for damages for negligence. Switch Pty Ltd Jack then tells you he has been working on the audit of Switch Pty Ltd under the supervision of his audit manager, Bruce. During the audit, Jack discovered a material cut-off error which caused revenue to be materially overstated. Jack reminds you that the policy of OEV is to document any material adjustment in the working papers, with the final determination being made by the senior audit partner. Jack also informs you that from his earlier discussions he knows that the management of Switch does not want to make any adjustments. Jack says that when they finished off the fieldwork, Bruce told Jack not to mention the adjustment in the working papers. Bruce said that Switch only has a small number of shareholders, that he knows from experience the audit partner won’t want to upset an important client and that they really need to finish things off as soon as possible in order to meet deadlines. Required Question 1 (5%) Based on the information provided by Jack in relation to Framed Ltd, and making reference to specific common law and/or auditing standards, prepare a report which addresses the following: · An outline of all the elements of the tort of negligence; · Whether the liquidators of Framed are likely to succeed in their action against OEV; · Whether OEV can reduce their liability to the liquidators of Framed; and · Whether VicBank is likely to succeed in their action against OEV. Question 2 (5%) Making reference to the Code of Ethics for Professional Accountants, advise Jack as to what he should do in response to the information he has provided regarding the audit of Switch Ltd. Use the following American Accounting Association (AAA) Model template to guide your response. American Accounting Association Model Decision-making process 1. Determine the facts The facts are ... 2. Define the ethical issues 3. Identify the major principles, rules, and values 4. Specify the alternatives 5. Compare values and alternatives 6. Assess the consequences 7. Make your decision Online submission via Turnitin is required for this assignment. Details will be provided by your subject lecturer. RATIONALE SUBJECT LEARNING OUTCOMES This assessment task will work towards assessing the following learning outcome/s: · be able to explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market. · be able to exercise critical and reflective judgement and appreciate the PRESENTATION Assessment tasks should be submitted on Turnitin as a Microsoft Word document. Do not submit as a PDF document. · The first page should contain your name, student number, subject code, word count and due date. Please use 12 point font and avoid the use of fancy templates with added colour or graphics. · Lines should be double spaced. · The assessment tasks should be within +/- 10% of the word limit. The word count is taken from the first word to the last word and includes quotes. Quotes must comprise less than 10% of the total word count. · Proof-read your work so that it is free of spelling, grammar, and punctuation mistakes. Use language that is appropriate for academic and professional tasks. Ensure you use respectful and appropriate terminology. For assistance, see Learning Skills: http://www.csu.edu.au/division/studserv/learning · Your reference list should contain all source documents that you refer to, quote or paraphrase from. It must conform to the APA referencing style: https://www.csu.edu.au/current-students/learning-resources/build-your-skills/academic-skills-help/referencing