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Question 1 5%
Battersby and Associates Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Australia. During the 2015 financial year Battersby and Associates gained a new client, Medical Services Holdings Group (MSHG), which owns 100 per cent of the following entities:
Green Grass Hospital, a private hospital group
Green Gardens Nursing Home Pty Ltd, a private nursing home
Complete Cancer Care Limited (CCCL), a private oncology clinic that specialises in the treatment of cancer.
Year end for all MSHG entities is 30th June.
CCCL owns two relatively old linear accelerators used in radiation therapy. Recently radiographers using these linear accelerators have raised concerns that they have adverse radiation impacts on patients.
The CEO of CCCL, Adam Chase, has approached Belinda Battersby, the audit partner responsible for the financial report audit, about undertaking an engagement in respect of the linear accelerators. Adam has requested Belinda provide an opinion that the linear accelerators are fit for use. Adam pointed out that the CCCL audit is up for tender the following year and suggested that Battersby and Associates might like to take on the linear accelerators engagement without charging a fee as a gesture of goodwill.
Source: Adapted from the CA Program’s Audit and Assurance exam, December 2008.
What should Belinda do? Use the Code of Ethics for Professional Accountants and the American Accounting Association (AAA) Model to help consider your response to this question.
Question 2 5%
Good corporate governance reduces the audit risk. Independent directors have been recognised as critical to good corporate governance.
Prepare a report for your fellow students that:
describes the current Australian recommendations for the inclusion of independent directors in a board of directors,
evaluates the continuing need for independent directors, and
identifies barriers to the effectiveness of the role of independent directors.