Yaw Manu is a Chartered Accountant who has been appointed as an auditor of Level Ltd at the annual general meeting of the company in December 2009 which assignment Yaw Manu accepted. In April 2010, Yaw Manu joined Kwaku Assenso also a Chartered Accountant, who is the Finance Manager of Level Ltd, as a partner.
Required:
Discuss the ethical issues raised in the above scenario. (5 marks)
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Disqualification of an auditor. In order to ensure the independence of the auditor Section 270 and 296 of the companies’ code contain grounds for disqualification of an auditor of a public and private company respectively. According to the section a person who is a partner or who is in the employment of an officer or employee of the company is not qualified for being appointed as the auditor.
In the given case, Yaw Manu has been appointed as an auditor of Level Ltd in the annual general meeting. Subsequently, he has become a partner of Kwaku Assenso who is the Finance manager (employee) of Level Ltd. This is one of the grounds for disqualification. Therefore, Yaw Manu shall be deemed to have vacated office automatically.
The ethical issues that could be raised in the above scenario are:
- Independence
- Self Review
- Confidentiality
- Conflict of interest
- Objectivity
- Collusion