Reference no: EM132779582
a) Michael and David were recently awarded the audit of Fresh Foods Ltd for the year ended 31 August 2019. Dan Folly, senior-in-charge, and an assistant observed the inventory on 31 August. Upon completion of the inventory observation, Brian Wally, Fresh Foods Ltd's controller, informed Dan Folly that the shipping supervisor had a small gift for him and the assistant. Dan Folly asked Brian Wally what the gift was for, and Wally responded that they had always given small gifts of food items to their previous auditors upon completion of the inventory observation. Dan Folly estimates that the value of the food is less than $200.
b) Mary Williams is a newly qualified accountant who is carrying out her first audit as the in-charge auditor for Fox Ltd, a retailing company. Mary had all the necessary qualifications in auditing these types of clients and has the relevant knowledge on the accounting requirements in relation to managing cash flows. She has completed her audit work diligently, under appropriate supervision, in accordance with all the audit procedures, and completed the relevant working papers and found no issues in the conduct of the audit for Fox Ltd for the financial year ended 30 June 2019. Ben Smith is Mary's supervisor and while finalising the audit it has now come to his attention that three years ago, Jenny Lin, head cashier of Fox Ltd and an expert in computer operations, devised a previously unheard method of embezzling funds from her employer. Lin's thefts were small at first, but they increased as time went on. More recently, the thefts came to the attention of Susan Green, the financial controller of Fox Ltd and she reported the matter to Ben Smith. When questioned about the variances, Lin confessed and explained her unique embezzlement scheme. Investigation revealed that she had stolen $200,000. Lin has no assets with which to repay the thefts.
Required:
Problem 1: For each situation, indicate whether any fundamental principles of IFAC Code of Ethics for Professional Accountants has been breached. Give reasons.