25.

What should an auditor do if he or she believes that the ethical culture of a client is
unsatisfactory?

The auditor should immediately bring the matter to the attention of the person in change of the
audit, so that the increase in audit risk may be assesed and extra audit tests or a qualification or
resignation can be considered. Also the problem should be brought to the attention of the client’s
the top management particularly to the CEO and CFO, and to the audit committee of the board , and
the internal auditors so that remedial action can be undertaken and increased costs and or test by
the internal auditors arraged. If the matter is not corrected the auditor should consider qualifying
their auditor report and or resigning the audit they should also consider making the reason for their
resignation clear to the public.

26. Are the governing partners of accounting firms subject to a “Due Diligence” requirement similar
to that for corporation executives in building an ethical culture? Can a firm and or its governors be
sanctioned for the misdeeds of its membes?

Yes, in some juridictions the firm can be diciplined and fined. Also lawsuit will require the resources
of the firm to defend or settle and will increase liability insurance costs. Possibly, some of the
partners invested capital may be required where the firm is a traditional partnership, or where they
are personaly regligent.

27. an engineer employed by a large multidiciplinary accounting firm has spotted a condition in a
client’s plant that is seriously jeopardizing the safety of the client’s worker. The engineer believes
that his or her professional engineering code requires his to report this condition to the authorities,
but professional accounting codes do not. How should the head of the firm resolve this issue?

After checking that the safety problems is serious and the engineeris correct in her/his
interpretationof his/her code, the senior partner should make sure that the client has been advised
of the problem and has been given a chance to repond with a satisfactory explanationand, or has
agreed to rectify the problem. The client should understand that the problem will have to be
reported unless rectifed. The remidial action must be verified. A professional engineer reasoned
with, but not orderednot to report such a violation. A multidiciplinary firm should have a code and
culture that supports professional code in a resposible manner. See also the discusision of the
multidiciplinary practice case in this chapter.

28. why don’t codes of conduct or existing jurisprudance provide sufficient guidance fot accountants
in ethical matters?

Because it is served by several sources of guidance available to professional accountant.