• The audit risk of this charity is likely to be high due to its size and consequent difficulty of implementing adequate controls (e.g. segregation of duties, supervision); due to the lack of the experience of the management committee of this particular type of business; and due to the fact that many of the staff are volunteers. This could lead to excessive reliance on the only paid members of staff – the manager and the assistant manager.

• In this case the client is pressurising the auditor to take on the audit of a small charity in which they are involved and do so for less than the full commercial fee. This puts the auditor in a difficult position and amounts (almost) to an intimidation threat to the auditor’s independence.

• It also raises a wider question of auditors doing work pro bono for charities or other good causes and brings up the issue of how this affects their independence. One view might suggest that never collecting a fee from the client would enhance independence since, if the auditor withdraws from the audit, or modifies the audit report, it will have no direct financial consequences for the audit firm.

• Another view would be that it would be much better if auditors charged in full for all work they did. They could still, as a firm, make charitable donations to perceived good causes, or for example, sponsor local fundraising events, but the decision to do that should be at arm’s length from any particular dealings with an individual client.
In this case, there is the need to consider if the fact that the request came from a committee member who is a client has any particular impact on the audit of that client. It might be going too far to suggest that it impugns the individual’s integrity but it certainly suggests a willingness on his behalf to use his relationship with the audit firm in a way that might not be considered wholly appropriate.

• Also, there is a heightened risk of bad publicity if anything goes wrong due to the fact that this is a charity and there could be significant publicity locally about the matter.

OFFEI-ANSAH & CO.
Integrity is vital in professional relationships because:

• It provides assurance to colleagues of good intentions and truthfulness. It goes beyond any codes of professional behaviour and describes a set of character traits that mean a person of integrity can be trusted. In this particular case it means that the Engagement Partner (EP) is obliged to do his best for his clients; for his fellow partners; and also for his staff. Conflicts will inevitably arise but they should be dealt with in an honest and straightforward way. From the above scenario, there is evidence of EP not acting in this way and “fobbing off” Ellen when she raises important issues with him.
• Time and energy spent in monitoring can be reduced when integrity and openness can be assumed (the opposite of an audit situation where the professional scepticism should be exercised). The Engagement Partner is the managing partner and, if he cannot be trusted, this undermines the control environment in the audit firm.
• It cultivates good working relationships in professional situations. It encourages a culture of mutual support that can have a beneficial effect on organisational effectiveness. Once again, EP’s apparent lack of professional integrity threatens to undermine this.

• The first point to be noted about the EP’s behaviour in this case is that it gives the impression of unprofessionalism and possibly, even, of corruption. GH¢125,000 is an individually material amount but notwithstanding the amount, the allocation of company funds on what could be little more than an expensive plaything for the CEO’s children is something that should be challenged.
• The EP’s failure to act on the information strongly suggests that he has failed in his duty to other users of Bremang’s financial statements such as lenders and even the taxation authorities. EP may not feel a duty of care towards, for example, Revenue but financial statements should not be signed off unless they show a “true and fair view”. The risk of, for example, the practice being censured in some way by the Revenue may be low but that does not reduce the imperative to act with integrity.
• The EP promised Ellen that he would, at least, get a written representation on the matter – albeit he seemed to downplay the significance of this – but in the end he apparently failed to do even that and again was dismissive of Sarah when she challenged him on the matter.
• The EP, therefore, gave the appearance of a lack of objectivity in his actions, possibly as a result of the threats to independence. This shows a lack of respect for Ellen’s professionalism and could lead her to develop a “why bother?” attitude if a similar issue arises in the future. Ellen will therefore    possibly be lead into a poor professional attitude herself or, alternatively, become disillusioned with the firm and will seek alternative employment as soon as she can.
• The EP is complicit in a probable breach of IAS 24 on Related Party Transactions.
  There is a disclosure requirement of all related party transactions regardless of value, and concealment of this is both unprofessional and technically irregular. Lack of disclosure should have led to a qualified opinion on the basis of material misstatement in the audit report.