- 15 Marks
AAA – Nov 2013 – L3 – SB – Q1 – Ethical Issues in Auditing
Evaluate whether to comply with a former executive’s request for audit services while addressing confidentiality in auditor-client relationships.
Question
Your firm acts as the auditors and advisers to Naija Seven Limited, and to its four directors. The company is owned 50% by Praise Caro, 25% by his wife Madame, and 10% by James Patrick. Braima is the Chief Executive, and Julius is the Finance Director. Julius’ sister, Mabel Mama, recently resigned from the executive board following a disagreement with Praise. Mabel Mama formed her own company, Nigeri Heaven, in competition with Naija Seven.
Currently, Mabel is negotiating with her former co-executives on the profit-related remuneration due to her and the sale of her 15% holding of shares in Naija Seven to one or all of them.
Mabel Mama has contacted you to find out Praise Caro’s current remuneration package since he refused to disclose it to her. She has also requested that your firm should continue to act as her personal adviser, financial adviser, and auditor to Nigeri Heaven.
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