Impact of Social Influence Pressure †Free Samples to Students

Question: Discuss about the Impact of Social Influence Pressure. Answer: Introduction: This case emphasises on the role of an auditor Alex Yeung of auditing firm Burt and Old. The current case is regarding the opinion of the auditor in the audit engagement report for the company Fancy Furniture Manufacturing. Fancy Furniture Manufacturing is a client of Burt Old since the past 12 year. Public listed med-size corporation primarily manufactures fine wooden furniture that consists of chair, table, benches, etc. Eucawood Lumber Supply is the major supplier of Fancy Furniture that supplies the company with best quality eucawood. Burt Old whose largest customer is Fancy Furniture Manufacturing also audit Eucawood Lumber Supply. On the other hand, the largest customer of Fancy Furniture Manufacturing is the Norbert Harvey to whom Fancy Furniture sells majority of its product on wholesale basis. On the other hand, it can be seen that the same audit firm that is Burt Old is also auditing Norbert Harvey who is the largest customer of Fancy Furniture. In other words, the different branches of the same audit firms audit all the three firms i.e. Fancy Furniture Manufacturing, Eucawood Lumber Supply and Norbert Harvey. Over the last 5 years Norbert Harvey is experiencing decent growth in terms of furniture that are manufactured by Fancy Furniture and the company wants to multiply the number of stores into Queensland by the coming year. From the beginning, the audit firm has issued unqualified audit report for Fancy Furniture. However, in the 4th quarter of the year 2017, some significant increase in the production cost for the company have been noticed. Firstly, the company suffered from substantial damage of its custom manufacturing equipment that were not insured and secondly, the company failed to favourably negotiate with its union which resulted in increase of employees superannuation expenditures. This was a substantial increase in expenditure from the companys viewpoint. Thus by considering the above mention two facts it is deemed by the engagement team that Fancy Furniture might not able to continue to carry on its business. The fact that Fancy Furniture might fail to continue as a going concern was discussed with the management of the company. However, despite knowing all the fact the management of Fancy Furniture is not willing to disclose the same in its audit report. Now, as per Accounting Professional Ethical Standard Board (APESB) 110, which describes about the integrity in carrying out audit programme states that section 110 of APES levied a compulsion over every professional accountants that they are required to be honest, loyal and candid in their audit approach (APES, 2017). It further states that no professional accountant should provide clean audit opinion intentionally after having knowledge about the fact that the financial statement of the company or firm contains the following: Deceptive statement or material misstatement; Information that are provided irresponsibly or carelessly. The section 120 of APES states that auditor or the accounting professional should maintain objectivity. The section 130 and 150 of the APES requires the professional should perform task with the professional competence and due care (Clayton Staden, 2015). Thus as it is found that in the 4th quarter Fancy Furniture has suffered from increase in production cost. As a result of which the company might wind up or be dissolved. It is important that this information must be specified in the audit report so that the investors, shareholders, supplier and the customer of the company gets to know about the current situation of the company and thus they are not misguided by any means (Zorio et al., 2013). Therefore based on the code of ethics as an auditor, it the duty of Alex Yeung to provide true and fair opinion based on proper facts and information. The auditor should not follow or safeguard the interest of the management of the company. The section 110 of APES imposes an obligation to eve ry accountant to maintain integrity and transparency in the audit report and it must be followed in case of Fancy Furniture Manufacturing as well. Reference (2017). Retrieved 30 September 2017, from https://www.apesb.org.au/uploads/standards/apesb_standards/standardc1.pdf Clayton, B. M., Staden, C. J. (2015). The Impact of Social Influence Pressure on the Ethical Decision Making of Professional Accountants: Australian and New Zealand Evidence.Australian Accounting Review,25(4), 372-388.