Reference no: EM133433585

Question 1
You are member of the Ethical Standard Board of professional accounting body in Malaysia. Mr Bosco Tan, a member of this professional body approached you on some matters related to ethical dilemma and professional issues.
Bosco Tan has recently been appointed as a partner of Wong & Associate, a medium-sized public accounting firm registered with Malaysian Institute of Accountants (MIA). Bosco is a close personal friend of Dato Wong TM, the audit firm's founder & partner of Wong & Associate. The new appointment requires Bosco to take charge of the training and ethical compliance of the audit firm in relation to MIA by laws
Over the past 3 years, Wong & Associate has recruited fresh graduates from the local universities as part of the yearly graduate recruitment programme. Those graduates recruited will undergo 1 year intensive training programme which include hands on audit.
In line with the requirements of the training programme, trainees are required to maintain a 'weekly log book' to record the brief details of their work performed and issues encountered during the week. This log book is reviewed by Bosco every fortnight. During a recent review, one of the trainees, Samantha Gan, stated that she was concerned on an issue she noted during the audit of Sokina Bhd (Sokina). In view of the peak period and lack of audit staff, Samatha was assigned to Sokina's audit after undergoing one day of orientation and one week of class room training
Sokina a medium-sized manufacturing company, located in Klang. This company registered a profit before interest and tax of RM 5 million for financial year end (FYE) September 2022). Wong & Co.is the external auditor for Sokina since it was established in year 2012 .Wong & Associate also provides other professional service beside audit. The board of Sokina has also agreed to appoint Wong & Associate to evaluate its expansion plan, advice and provide necessary support in relation to the application of loan from a reputable local bank.
As part of Sokina financial statements audit FYE 30 September 2022, Samatha was assigned to audit the purchases of non-current assets. In vouching one of the payment vouchers, she noticed and suspected an irregularity related to the nature of payment to a supplier in East Malaysia. The payment of RM525, 000 was for the supply of a helicopter for Managing Director (MD) of Sokina Bhd personal use when he is in his hometown at Sabah .
When Samatha queried Sokina's financial director (FD) on this matter, she was told that the Helicopter was purchased under the name of the MD. The FD further explained that the purchase of the helicopter was to facilitate the transportation for the MD and his family when they travel to Sabah for holiday. He (FD) also explained that substantial part of the cost was attributed to the payment made for the yearly maintenance of the helicopter.
The FD appeared annoyed and furious when being queried about the matter. He said previously the auditors were not concerned at all about the company being charged for non-current assets and expenses paid for maintenance of private property owned by the MD.
In line with the audit firm's quality control policies, Wong & Associate's partners have always encouraged open communication within the audit firm members .Audit staff regardless of seniority and level are empowered to share their thoughts without any fear of repercussions
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The engagement partner on Sokina's audit happened to be the founder, Mr Wong TM. Samatha took the courage to inform Mr Wong what she had noted during the audit of Sokina. To her surprise, Mr Wong simply said that the matter is not material and could be easily ignored. In order to please Samantha, Mr Wong casually mentioned that he would include the said matter in the written representations letter in relation to ISA 580. Four months later, Samantha checked the completed working paper files, in particular, the letter of representation. She noticed that, there was no mentioned on the said matter at all. When Samatha asked Mr Wong, he casually replied "Oh dear! I have overlooked on this matter. In future, I must cultivate a habit to jot things down. Well nothing we can be done about it now."
When Bosco read about Samantha's concern related to this matter, he spoke to Samantha directly. He (Bosco) realised that there was an ethical issue. Bosco was of the opinion that the matter should have at least been disclosed as a related party transaction. However the situation was a bit to address since Mr Wong TM is a close friend of Bosco.

Required:
Draft a letter to Bosco Tan to address the matter(s).In your letter you should:
(a) Discuss the relevant fundamental ethical principle(s) and its importance. (Refer to the relevant section of MIA by laws.)