plans to establish a separate business

Question 6

Consider the following independent situations: (total 1500 words/ 300 words for each)

1. Kelly Beam, sole proprietor of an audit firm, plans to establish a separate business that will provide management consulting services. She intends to operate both businesses simultaneously.

2. Will Peters is the partner-in-charge of the audit of Redline Ltd (Redline). Over the years, he has become a golfing buddy of Redline’s CEO, Timothy Fall. During the current year, Will and Timothy jointly purchased an exclusive holiday house on Sydney Harbour. The holiday house represents more than 10 per cent of Will’s personal wealth.

3. Mary James, a sole practitioner, has provided extensive advisory services for her audit client, Long and Tall Ltd. She has interpreted financial reports, provided forecasts and other analyses, counselled on potential expansion plans and banking relationships.

4. Smith and Associates recently won the audit of Kiddies Fashions Ltd (Kiddies), a large manufacturer of children’s clothing. Ken Smith had a substantial investment in Kiddies prior to bidding on the engagement. In anticipation of winning the engagement, Ken placed his shares in Kiddies in a blind trust.

5. Tom Chan, a sole practitioner, audited Bear Pty Ltd’s financial report for the year ended 30 June 2012, and was issued shares by the client as payment of the audit fee. Tom disposed of the shares before commencing fieldwork planning for the audit of the 30 June 2013 financial report.

Required

For each situation, determine whether APES 110 has been breached and explain your answer.

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