Reference no: EM13330327

Laila, a chartered accountant, has been asked by an audit client to undertake an engagement involving implementing an IT information and control system. The client requested that, in setting up the new system and during the period prior to conversion to the new system,

Laila
• Counsel on potential expansion of business activity plans
• Search for and interview new personnel
• Supply the computer hardwares for the system upgrade
• Train personnel
• Determining what type of control should be integrated in the new system

In addition, the client request that, during the three months subsequent to the conversion, Laila

• Report, on behalf of the management to the board of director on the effectiveness of the new system.
• Monitor the client-prepared source documents and make changes in basic IT-generated data as Laila may deem necessary without concurrence of the client.
• Make recommendation for changes deem necessary for the effectiveness and efficiency of the system.

Laila responds that she may perform some of the services requested but not all of them since it could lead to the violation of MIA By-Law.

The following situations involve a possible violation of the MIA ByLaws (on professional ethics, conduct and practice). For each situation,

(1) decide whether or not the Code has been violated, and (2) briefly explain how the situation violates (or does not violate) the Code.

a) Fitri, a sole proprietor in public practice, plans to establish a separate department that will provide internal audit service to his audit clients.

This situation involve violation of MIA ByLaws. The provision of internal audit services to audit clients may create self-review and self-interest threats. Under the by-laws, provision of internal audit services to clients which are listed entities is prohibited.

b) Eco Pharmaceutical has traditionally been presenting the member of the audit team with New Year discount vouchers that can be used at any of its outlets in Malaysia. This year, because of the good company performance, each member is given a discount vouchers worth RM200.

c) Khairy Jamaluddin, CA, was traveling from Haadyai, Thailand to Sungai Petani, Kedah when he was pulled over by a custom officer at Bukit Kayu Hitam on suspicion of smuggling. He was convicted in court and was sentenced to 5 years in prison.

d) Kelley Brent, CA, is a partner in a one-office CA firm that audits Dane, Inc., a closely held corporation. Kelley's sister was recently appointed as the chief financial officer for Dane, Inc.

e) On August 20, 20x6, Hank Anderson, CA and partner, was offered and accepted the engagement to audit the annual financial statements of Jernigan Corporation for the year ended December 31, 20x6. Preliminary work began on the audit on September 15, 20x6 and the engagement ended on March 7, 20x7. Jernigan is regulated by the SEC. Hank served as controller of Jernigan Corporation from December 1, 20x2, until April 10, 20x6, at which time he terminated his employment with Jernigan.