DEPARTMENT OF ACCOUNTING, FINANCE & ECONOMICS

General Instructions to answer the assignment

• You must answer the question in the context of the case and not provide a general discussion.
• Marking the assignment will consider grammar, sentence construction and logical flow of arguments. References are NOT required.
• Maximum word limit is 1500 words. Use 12-point font in either Times New Roman or Arial font. Approximate word limits have been provided per question as a rough guide, however the word limit for the overall assignment must not exceed 1500 words. Assignments that exceed this limit will be penalized.
• Include a title page that includes assignment heading, course name (3102AFE), your name, student number and total number of words.
• An indication of marks to be allocated per question is provided on the assignment rubric.
• Please ensure that you also complete the electronic assignment cover sheet before submitting your assignment.

Required:

Refer to the Anton Hayden & Partners case on the next page and answer the questions that follow.

CASE STUDY: ANTON HAYDEN & PARTNERS

The external auditors: Anton Hayden & Partners (AHP)

Anton Hayden & Partners (AHP), is a medium-sized audit firm providing audit, advisory and taxation services to an array of clients, many of whom are in the hospitality & tourism sector. Jessica Anton and Chris Hayden are the founding partners, and twelve other partners have been admitted to the entity since its inception in 2002. This year, the partners celebrated the opening of the third office in Southport. They now have offices in Southport, Cairns and Caloundra which support their growing clientele across the tourism hotspots of Queensland.

Jessica and Chris originally met when they were both interns at KPMG in the 1990’s. After working together for several years and qualifying as Chartered Accountants they found that they shared a common work ethic. Finding themselves increasingly frustrated with being just another audit senior in an extremely large international audit firm, they decided to go out on their own. Their plan was to establish a progressive audit firm but with a strong sense of community, believing that staff that felt both challenged and a sense of belonging would enhance productivity. Over the 20 years life, AHP has developed a reputation for conducting quality audits and enabling professional accountants to rapidly develop strong professional acumen. This is achieved through having a culture that encourages collaboration and teamwork, but still requires staff to assume ownership for assigned tasks and responsibilities. The partners believe that this approach encourages staff to consult with each other and the more experienced personnel when faced with challenges, enhancing accountability and professional judgement. This approach has paid off with AHP becoming a desirable firm for new interns to launch their professional accounting careers. Six of these interns have never left, ultimately attaining partnership level.

When asked what set AHP apart, in a recent interview for the CPA magazine ‘IntheBlack’, Jessica answered “I think we seem to have struck a good balance between teamwork and the pursuit of excellence, you know. The partners have set high expectations for staff to keep improving their audit practice and skills. For instance, aside from regular formal in-house training, staff are eager to participate in global online workshops that are focused on developing particular areas of expertise. Just last month several of our staff joined some of us partners in an online workshop held by a California-based PWC-sponsored workshop on Data Analytics, Ethics and Tourism. It was at about 3am our time, so the staff had a bit of fun and we all dressed up all formal executive dress from the waist up and pyjamas and slippers waist down, met in the boardroom and ordered in pizzas and popcorn. After the

workshop we had a big brainstorming session with everyone that was there, and it was good to hear some of the ‘young guns’ and trainees sharing their thoughts. They bring a different perspective, you know? Maybe they don’t have the wisdom of professional experience yet, but they bring valuable insights to the table. It was great! Good thing it was a Saturday though! (laughs). So yeah, that’s a good example of how we integrate our strong ethos of excellence and teamwork. And you know, from that we have reviewed our business strategy, and been able to incorporate some of the learnings from that workshop, and specifically what was discussed afterwards into our plans for the next three years. We have some really exciting stuff that we will be launching over the next six months that will strategically enhance our tourism industry specialisation, and also cater for some new services that we will be launching. And everyone is excited about this, especially those who attended the session because it also shows that they all have a voice and that they are heard. And that’s important these days, I think.”

The client: Outback Safaris Limited

Outback Safaris Pty Ltd (‘Outback’) is an Australian listed hospitality company that owns several bush camp properties in key tourism hotspots, such as Fraser Island and the Red Centre. Services provided include holiday tour packages that operate from the bush camp locations. The founding directors of Outback are Harry Jones (CEO), Ben Binder, Orlando Cooper (CFO) and Katy Bradley, each holding a 25% ownership in the private company. The financial year of Outback ends on 31 December each year.

The directors have prepared detailed growth strategies to include expanding their tour operations to include other areas within Oceania and have set a goal to list the company in two years’ time. As the company has not met the criteria to be classified as a large proprietary company in terms of the Corporations Act, Outback’s annual financial statements were neither audited nor independently reviewed previously. However, in view of their need for capital financing to fund their expansion projects, they now require audited financial statements and have resolved to be audited from FY2022 onwards. Hence, they have approached Anton Hayden & Partners (AHP) to be appointed as the company’s external auditors.

AHP have accepted the engagement and have pencilled in Pat Connors as the audit manager, Ashley Rates as the audit senior and assigned two trainee accountants as the engagement team for the 2022 financial report audit. Chris Hayden is to act as Engagement Partner as he has the most experience auditing private companies.

Pat Connors and State of Origin Evening

Pat Connors is a mad about rugby league, and he dreamed about being a professional player. He represented his school in the NRL Schoolboy Cup and was selected to play for the Wynnum-Manly Seagulls, whilst at university. In his second year however, he sustained a nasty knee injury and he reluctantly hung up his boots. He completed his accounting traineeship at Deloittes and joined AHP in February 2022. Outback invited Jessica & Chris to watch the third State of Origin match in Brisbane in July 2022, however they decided that it was not appropriate for them to attend. Instead, they suggested that Pat (given his history with NRL) and another staff member, Jean, who was not on the engagement team go in their place. The evening at Outback’s corporate suite at Suncorp Stadium did not disappoint. During half- time Jean and Pat were introduced to Harry Jones and several other Outback staff, and they talked about Pat’s brief sporting career, and his transition to the accounting profession. Jean let slip that Pat would be the audit manager on the upcoming Outback audit. Later in the evening before leaving, Harry called Pat aside and whispered that he would be able to secure Gold Membership at Suncorp Stadium for Pat, “especially if things go well with the upcoming audit” he added. Pat thanked him and said he’d give it some thought. On the train home that evening, Pat decided that he wouldn’t mention the offer to anyone at work, because at about

$2000 a year, Gold Membership was very enticing.

REQUIRED:

1. Evaluate, with reference to ASQM 1, the extent to which the partners at AHP demonstrate commitment to audit quality. You are to limit your discussion to the facts of the case and the relevant sections of ASQM 1 that relate to Governance and Leadership. Ensure that you cite evidence from the case AND references from ASQM 1 to support your evaluation. (Approximately 300 – 400 words)
2. Analyse whether it is appropriate for Pat Connors to remain on the audit team for the Outback engagement (i) having attended the State of Origin match; and (ii) assuming he accepts the Gold Membership at Suncorp Stadium. You should structure your answer as follows:
   1. Code of Ethics requirements: Explain, with reference to s420 and s340 of APES 110 Code of Ethics for Professional Accountants what the relevant rules and regulations stipulate regarding the acceptance of gifts and hospitality. (Approximately 500-600 words)

• Application: Apply the rules outline in part (a) above separately to each of issues
  • and (ii) above, indicating whether you believe that they represent inducements or not, identifying any specific threats to independence and objectivity that these offers of gifts and hospitality could give rise to, and suggesting appropriate safeguards to reduce threats to acceptable levels. (Approximately 400-450 words)
  • Conclusion – provide a concise conclusion/recommendation as to whether Pat can remain on the engagement team given his attendance at the NRL match and the acceptance of the Gold Membership. (Approximately 50 words)

Notes:

• Relevant links are provided below:

APES 110 Code of Ethics for Professional Accountants

Auditing Standard ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements

• Where applicable, be specific in your answer in terms of both the source of rules (i.e. include reference to specific sections and/or sub-sections of the regulations, e.g. APES 110 s400.5) and in terms of what the rules stipulate about the issue you are discussing.

SUGGESTED FORMAT FOR ANSWERS:

• You should present your assignment using the following headings:
  • Question 1 – ASQM 1 evaluation of case
  • Question 2 – APES 110 rules for gifts and hospitality
  • Evaluation of attendance at State of Origin Match
  • Evaluation of acceptance of Gold Membership
  • Conclusion

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