Tuesday, 14 May 2013
Total Marks20Starting DateFriday, May 10, 2013Closing DateTuesday, May 14, 2013StatusOpenQuestion/DescriptionLearning Objective:
The students are expected to learn about ATR 14 observed by the professional auditors in Pakistan.
Background:
Consider the following sections of revised Code of Ethics for Chartered Accountants issued by Institute of Chartered Accountants of Pakistan as background before attempting this GDB:
Section 210
210.1 Before accepting a new client relationship, a chartered accountant in practice shall determine whether acceptance would create any threats to compliance with the fundamental principles. Potential threats to integrity or professional behavior may be created from, for example, questionable issues associated with theclient (its owners, management or activities).
210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
The Case:
M/S Atta Ch. Chartered Accountants (ACCA) is currently rated among top five chartered accountancy firms of the country. Mr. Bakshi Khan, the company secretary of Multi Cement Company (MCC) – a company which is a market leader of cement sector, has requested ACCA to act as their auditors for the next financial year in place of their current chartered accountancy firm M/S Haji & Sons Chartered Accounts (HSBA). Overall, ACCA is happy to get the appointment but the HSBA has not yet resigned. Mr. Bakshi has assured that MCC will not reappoint them in future provided ACCA wave off 25 percent of the first year audit fee.
Required:
Whether the above arrangement is acceptable under both legal and ethical guidelines? Explain your answer in the light of ATR-14.
Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
ACC311 1st GDB Solution spring 2013
Consider the following sections of revised Code of Ethics for Chartered Accountants issued by Institute of Chartered Accountants of Pakistan as background before attempting this GDB:
Section 210
210.1 Before accepting a new client relationship, a chartered accountant in practice shall determine whether acceptance would create any threats to compliance with the fundamental principles. Potential threats to integrity or professional behavior may be created from, for example, questionable issues associated with the client (its owners, management or activities).
210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
The Case:
M/S Atta Ch. Chartered Accountants (ACCA) is currently rated among top five chartered accountancy firms of the country. Mr. Bakshi Khan, the company secretary of Multi Cement Company (MCC) – a company which is a market leader of cement sector, has requested ACCA to act as their auditors for the next financial year in place of their current chartered accountancy firm M/S Haji & Sons Chartered Accounts (HSBA). Overall, ACCA is happy to get the appointment but the HSBA has not yet resigned. Mr. Bakshi has assured that MCC will not reappoint them in future provided ACCA wave off 25 percent of the first year audit fee.
Required:
Whether the above arrangement is acceptable under both legal and ethical guidelines? Explain your answer in the light of ATR-14.
Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
http://www.icap.org.pk/userfiles/file/ha...diting.pdf
AUDITING ATR-14 (Revised-200
Notes:
i) The terms “Economically Significant Entities” (ESE), “Medium Sized
Entities”(MSE) and “Small Sized Entities” (SSE) shall have the same
meaning as defined in S.R.O.859(I)/2007 dated 21 August 2007 issued
by the Securities and Exchange Commission of Pakistan pursuant to
Section 234 of the Companies Ordinance, 1984.
ii) Considering the practical difficulties being faced by various practicing
members in the determination of audit fee, the Council has decided
that the prescribed minimum audit fee shall be charged without any
exception. However, in case of an existing audit client, the present
audit fee shall be enhanced to the aforesaid prescribed level over a
period of two years with mutual consent provided it is not less than
75% of the prescribed minimum in the first year. Nevertheless, in case
of acceptance of an audit client by a practicing member for the first
time the prescribed fee levels shall be strictly observed.
5. Minimum Audit Fee in Certain Circumstances
. Minimum Audit Fee in Certain Circumstances
For audit engagements of clients in the pre-incorporation / pre-operation
stages or in case of sickness of the project or closed operations or
discontinuation of business, the prescribed minimum audit fee chargeable
by the practicing members shall be as under:
Listed Companies/
ESEs
MSEs SSEs
Minimum audit fee:
Rs.75,000
Rs.50,000 Rs. 30,000
The exception in paragraph 4(ii) above shall apply mutatis mutandis to the above
paragraph 5.
6. The minimum audit fee prescribed in paragraph 4 and 5 above is exclusive of
the below mentioned additional services to be rendered by a statutory auditor
under the Code of Corporate Governance and for any other certifications and
the professional fee for such services shall be charged separately by mutual
consent
The students are expected to learn about ATR 14 observed by the professional auditors in Pakistan.
Background:
Consider the following sections of revised Code of Ethics for Chartered Accountants issued by Institute of Chartered Accountants of Pakistan as background before attempting this GDB:
Section 210
210.1 Before accepting a new client relationship, a chartered accountant in practice shall determine whether acceptance would create any threats to compliance with the fundamental principles. Potential threats to integrity or professional behavior may be created from, for example, questionable issues associated with theclient (its owners, management or activities).
210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
The Case:
M/S Atta Ch. Chartered Accountants (ACCA) is currently rated among top five chartered accountancy firms of the country. Mr. Bakshi Khan, the company secretary of Multi Cement Company (MCC) – a company which is a market leader of cement sector, has requested ACCA to act as their auditors for the next financial year in place of their current chartered accountancy firm M/S Haji & Sons Chartered Accounts (HSBA). Overall, ACCA is happy to get the appointment but the HSBA has not yet resigned. Mr. Bakshi has assured that MCC will not reappoint them in future provided ACCA wave off 25 percent of the first year audit fee.
Required:
Whether the above arrangement is acceptable under both legal and ethical guidelines? Explain your answer in the light of ATR-14.
Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
ACC311 1st GDB Solution spring 2013
Consider the following sections of revised Code of Ethics for Chartered Accountants issued by Institute of Chartered Accountants of Pakistan as background before attempting this GDB:
Section 210
210.1 Before accepting a new client relationship, a chartered accountant in practice shall determine whether acceptance would create any threats to compliance with the fundamental principles. Potential threats to integrity or professional behavior may be created from, for example, questionable issues associated with the client (its owners, management or activities).
210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
The Case:
M/S Atta Ch. Chartered Accountants (ACCA) is currently rated among top five chartered accountancy firms of the country. Mr. Bakshi Khan, the company secretary of Multi Cement Company (MCC) – a company which is a market leader of cement sector, has requested ACCA to act as their auditors for the next financial year in place of their current chartered accountancy firm M/S Haji & Sons Chartered Accounts (HSBA). Overall, ACCA is happy to get the appointment but the HSBA has not yet resigned. Mr. Bakshi has assured that MCC will not reappoint them in future provided ACCA wave off 25 percent of the first year audit fee.
Required:
Whether the above arrangement is acceptable under both legal and ethical guidelines? Explain your answer in the light of ATR-14.
Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
http://www.icap.org.pk/userfiles/file/ha...diting.pdf
AUDITING ATR-14 (Revised-200
Notes:
i) The terms “Economically Significant Entities” (ESE), “Medium Sized
Entities”(MSE) and “Small Sized Entities” (SSE) shall have the same
meaning as defined in S.R.O.859(I)/2007 dated 21 August 2007 issued
by the Securities and Exchange Commission of Pakistan pursuant to
Section 234 of the Companies Ordinance, 1984.
ii) Considering the practical difficulties being faced by various practicing
members in the determination of audit fee, the Council has decided
that the prescribed minimum audit fee shall be charged without any
exception. However, in case of an existing audit client, the present
audit fee shall be enhanced to the aforesaid prescribed level over a
period of two years with mutual consent provided it is not less than
75% of the prescribed minimum in the first year. Nevertheless, in case
of acceptance of an audit client by a practicing member for the first
time the prescribed fee levels shall be strictly observed.
5. Minimum Audit Fee in Certain Circumstances
. Minimum Audit Fee in Certain Circumstances
For audit engagements of clients in the pre-incorporation / pre-operation
stages or in case of sickness of the project or closed operations or
discontinuation of business, the prescribed minimum audit fee chargeable
by the practicing members shall be as under:
Listed Companies/
ESEs
MSEs SSEs
Minimum audit fee:
Rs.75,000
Rs.50,000 Rs. 30,000
The exception in paragraph 4(ii) above shall apply mutatis mutandis to the above
paragraph 5.
6. The minimum audit fee prescribed in paragraph 4 and 5 above is exclusive of
the below mentioned additional services to be rendered by a statutory auditor
under the Code of Corporate Governance and for any other certifications and
the professional fee for such services shall be charged separately by mutual
consent
