Page 1 of 5 BUACC 3741-AUDITING Semester 1, 2020GROUP ASSIGNMENT DUE DATE AND TIME: ...

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Page 1 of 5
BUACC 3741-AUDITING
Semester 1, 2020
GROUP ASSIGNMENT

DUE DATE AND TIME: XXXXXXXXXXWeek 10, Sunday 31st May at 5:00 PM
XXXXXXXXXXOnline group submission via Moodle)
PERCENTAGE OF FINAL GRADE: 25% (25 marks) of your total marks for this unit.
Assignment Description / Requirements
• The assignment has three questions. Word Limit is 3,000 words.
• This is a group assignment. Each group must be completed in a group of 2 to 3
members. It is the students’ responsibility to form/join a group and to ensure that the
group dynamics work.
• Students must fully reference the relevant sources of all materials (i.e., textbooks,
journals, newspapers, or internet, etc), even if you have re-expressed the ideas, facts or
descriptions; acknowledge all direct quotations; and not submit their work that has been
esearched and written by another person. Plagiarism is heavily penalised.
• Please monitor Moodle regularly for any further instructions or announcements.
Format of the Assignment:
• Title Page - including group number, student names and student IDs.
• Question 1 Answer
• Question 2 Answer
• Question 3 Answer
• References-including the relevant sources that you cited.
Submission Instruction:
This assignment is to be submitted online only. (You are not required to submit a hard copy)
The completed assignment must be submitted into Assignment Dropbox on Moodle on or
efore the due date. Only one submission per group is required. i.e. only one student submits
on behalf of all other group members.
Page 2 of 5

When you are required to submit an assignment through your Moodle Unit site, you will
eceive an email to your Federation email address confirming that it has been submitted. Once
submitted you cannot take your assignment back but you can submit another version. The
most recent version submitted will be marked.
You must keep a backup copy of every assignment you submit, until the marked assignment
has been returned to you. In the unlikely event that one of your assignments is misplaced, you
will need to submit your backup copy.
Any work you submit may be checked by electronic or other means for the purposes of
detecting collusion and/or plagiarism.
Marking, Dispute Resolution and Free Riders:
The marking will be done for the group as a whole not on individual basis. Each group member
is awarded the same mark.
Working in groups has its pros and cons. It is beneficial that you can learn a lot by discussing
the issues with your fellow students. Invariably different group members
ing different skills
to a project; it is up to you to make the best of it. If you find your group members are “not
pulling their weight” or there are problems with any member’s commitment, please try to
esolve those issues amongst yourselves. Open and honest communication always helps.
If you are unable to resolve these issues, you are most welcome to see your lecturer and tutor.
We will try to sort out the problems together. Do this as soon as possible and certainly before
the due date. In case of any dispute among the group members or if there are any free riders
identified in the group, members should report to your lecturer in writing.
Assessment Feedback:
Students who submit their work by the due date will receive their marks and feedback on
BUACC 3741 Moodle site within 15 working days of the assignment submission due date.
Penalties for Late Submission:
The marking penalties will apply if you submit an assessment task after the due date without
an approved extension: 5% will be deducted from available marks for each calendar day.
Requests for extension of time must be made with the lecturer concerned and based on Special
Consideration guidelines.
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-
services/student-advisory-service/special-consideration-tips
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-services/student-advisory-service/special-consideration-tips
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-services/student-advisory-service/special-consideration-tips
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Notes:
• There is a discussion area on Moodle titled ‘Assignment discussion Forum’. This area is
for you to discuss the assignment. It is an area for students to help each other.
• The assignment is to comply with the University’s General Guide to Writing and Study
Skills, General Guide to Referencing, and Assignment Layout and Appearance
Guidelines, via the links below:
https:
federation.edu.au/__data/assets/pdf_file/0018/190044/General-Guide-to-Writing-
and-Study-Skills.pdf
https:
federation.edu.au/__data/assets/pdf_file/0020/313328/FedUni-General-Guide-to-
Referencing-2016ed.pdf
https:
federation.edu.au/__data/assets/pdf_file/0017/190043/General-Guide-to-Layout-
and-Appearance.pdf
• Penalties for late submission: The marking penalties will apply if you submit an
assessment task after the due date without an approved extension: 5% will be deducted
from available marks for each calendar day up to five days, and work that is submitted
more than five days after the due date will not be marked. Requests for extension of time
must be made with the lecturer concerned and based on Special Consideration guidelines.
For further information on Discretionary Assessment Extensions and Special
Consideration, including access to the policy, procedures or associated forms, see
http:
federation.edu.au/cu
ent-students/essential-info/administration/special-
consideration
• Plagiarism and collusion are forms of cheating and are considered a serious academic
misconduct, and severe penalties are associated with them. Please refer to the university
policy for more information.
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-
support-services/student-advisory-service/misconduct/accused-of-plagiarism-or-
misconduct
• Turnitin: Students are strongly recommended to check originality through Turnitin, prior
to submitting the final assessment. For more information about Turnitin and how to check
for originality, refer to the following useful links:
https:
fedflix.federation.edu.au/media/Uploading+to+Turnitin/0_irjuaw8p/ XXXXXXXXXX
https:
federation.edu.au/cu
ent-students/learning-and-study/online-help-
with/plagiarism
https:
moodle.federation.edu.au/course/view.php?id=64539
https:
federation.edu.au/__data/assets/pdf_file/0018/190044/General-Guide-to-Writing-and-Study-Skills.pdf
https:
federation.edu.au/__data/assets/pdf_file/0018/190044/General-Guide-to-Writing-and-Study-Skills.pdf
https:
federation.edu.au/__data/assets/pdf_file/0020/313328/FedUni-General-Guide-to-Referencing-2016ed.pdf
https:
federation.edu.au/__data/assets/pdf_file/0020/313328/FedUni-General-Guide-to-Referencing-2016ed.pdf
https:
federation.edu.au/__data/assets/pdf_file/0017/190043/General-Guide-to-Layout-and-Appearance.pdf
https:
federation.edu.au/__data/assets/pdf_file/0017/190043/General-Guide-to-Layout-and-Appearance.pdf
http:
federation.edu.au/cu
ent-students/essential-info/administration/special-consideration
http:
federation.edu.au/cu
ent-students/essential-info/administration/special-consideration
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-services/student-advisory-service/misconduct/accused-of-plagiarism-or-misconduct
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-services/student-advisory-service/misconduct/accused-of-plagiarism-or-misconduct
https:
federation.edu.au/cu
ent-students/assistance-support-and-services/student-support-services/student-advisory-service/misconduct/accused-of-plagiarism-or-misconduct
https:
fedflix.federation.edu.au/media/Uploading+to+Turnitin/0_irjuaw8p/ XXXXXXXXXX
https:
federation.edu.au/cu
ent-students/learning-and-study/online-help-with/plagiarism
https:
federation.edu.au/cu
ent-students/learning-and-study/online-help-with/plagiarism
https:
moodle.federation.edu.au/course/view.php?id=64539
Page 4 of 5

Assignment
This assignment has three questions.
Question 1:
A number of corporate failures took place in Australia and the United States between 2000 and
2010 causing a major creditability crisis in the accounting and auditing profession. Discuss
iefly the accounting i
egularities found in some of the major corporate collapses (Discuss
three corporate collapses).
XXXXXXXXXX = 15 marks)
Question 2:
Background:
ABC Partners is a growing accounting firm in Australia. During the year of 2019, ABC Partners
gained a new client, Australian Fitness Group, which owns 100 per cent of the following
entities: (1) Twister Pty Ltd, a factory to manufacture and distribute a range of gym equipment,
and (2) Cam Fitness Limited (CFL), a gym studio.
CFL owns ten gym equipments in the studio. Recently, there have been some reports from
customers that the material under consideration is of a poorer quality and has led to some minor
accidents when using the gym equipment.
The manager of CFL, Betty Smith, has approached Elise Dallimore, the audit partner
esponsible for the financial report audit, about undertaking an engagement in respect of the
gym equipment. Betty has requested Elise provide an opinion that the gym equipments are fit
for use. Betty pointed out that the CFL audit is up for tender the following year and suggested
the ABC Partners might like to take on the gym equipment engagement without charging a fee
as a gesture of goodwill.
Prior to the appointment of ABC Partners as the auditor for the group which controls CFL,
Twister Pty Ltd, for the 2019 financial year, some preliminary analysis by Elise identified the
following situations:
1. One of the accountants intended to be part of the 2019 audit team owns shares in
Australian Fitness Group. The accountant’s interest is not material to him.
2. ABC Partners was previously engaged by Australian Fitness Group to value its
intellectual property. The balance sheet at 30 June 2018 includes intangible assets of $5
million, which were valued by ABC Partners on 1 January 2018 following Australian
Fitness Group’s acquisition of Twister Pty Ltd. The intangibles are considered material
to Australian Fitness Group.
Required:
(a) Explain why Elise should have reservations about accepting the engagement in respect of
the gym equipments. (Note: use appropriate fundamental ethical principles to support your
answer).
Page 5 of 5

(b) Use your knowledge of APES 110 to identify and explain the potential type of threat to
ABC Partners’ independence in scenarios (1) and (2) above.
(c) What action should ABC Partners take to eliminate the potential threats to independence in
scenarios (1) and (2) above? What safeguards should be instituted to reduce the risk of
similar independence threats occu
ing in the future?
XXXXXXXXXX = 15 marks)
Question 3:
(a) Select and discuss eight of the following which could impact on an auditor’s work and
capacity to make decisions
Anchoring / Anthropic Bias / Attributional Bias / Availability Bias / Barnum Effect / Base Rate
Neglect / Behavioural Confirmation / Belief Perseverance / Bias Blind Spot / Clustering
Illusion / Confirmation Bias / Conjunction Fallacy / Contrast Effect / / Cultural Bias / Dilution
Effect / Disconfirmation Bias / Egocentric Bias / Endowment Effect / Experimenter’s Regress
False Consensus Effect / Framing Effect / Fundamental Attribution E
or / Gambler’s Fallacy
Group Serving Bias / Group Attribution E
or / Halo Effect / Hindsight Bias / Hostile Media
Effect / Hype
olic Discounting / Illusion of Control / Illusion of Validity / Illusory Co
elation
Impact Bias / Infrastructure Bias / In Group Bias / Just World Phenomenon / Kuleshove Effect
Lake Wobegon Effect / Logical Fallacy / Loss Aversion / Media Bias / Memory Bias / Mere

buacc3741sem12020assignment1-x5eabqha.pdf buacc3741sem12020assignment1-pe1ijj0o-4uh15yn4.pdf

Akash · Accepted Answer

BUACC 3741 - AUDITING 
Semester 1, 2020
GROUP ASSIGNMENT
Table of Contents
Answer 1:	3
Lehman Brothers Holdings Inc.	4
Arthur Andersen LLP	4
One Tel	5
Answer 2	5
(a)	6
(b)	7
(c)	8
Answer 3:	8
a)	9
Infrastructure Bias	9
Media Bias	9
Sunk Cost Effect	10
Selective Perception	10
Selection Bias	10
Misinformation Effect	10
Overconfidence Bias	11
Planning Fallacy	11
(b) Four organisational constraints affecting auditor’s decision making	11
References	13
Answer 1:
The auditors are referred to as the watchdog of a company because of his knowledge, auditing skills and the skills possessed to audit the accounts of a company. According to Whitfield (2018), auditing is not a conclusive assurance that there is no fault in the accounts of the company. However, it provides reasonable assurance that there is no material misstatement in the financials of the company. Here it is important to note that auditors check that there is no material misstatement in the books of accounts. However, small and irrelevant errors may be left unchecked. What is more important at this point that whether in aggregate these minute errors may become material for the users; Here, the integrity and ethics of the auditor is important. The auditor may in consonance with the management may enter in any fraudulent activities or indulge in fraud or indulge and hide the fraud. This is one of the main reason for the collapse of the corporates. As commented by Adu-Gyamfi (2016), no matter how big the company is but fraudulent accountings, frauds and involvement to management and auditor to window dress these bad works leads to corporate failures. Here we are discussing three major corporate failures between 2000 and 2010 that raised a major question on the credibility of accounting and auditing profession. These are as follows-
Lehman Brothers Holdings Inc.
The discussion of corporate collapse cannot be done without discussing the biggest corporate collapse in the history of America and the world. The collapse of Lehman Brothers, which was a financial company and one of the biggest company in America. The company engaged in the business of financing mortgage assets, which was unregulated by the US government. It was also the fourth largest bank in America just behind Goldman Sacs others. Before getting bankrupt, it was engaged in business of trading in equity, investments, money market trading and similar issues. According to Ball (2018), the company has filed the petition for bankruptcy in US courts in 2008. This was just after rating agencies, investors and other stakeholders loosed confidence in the company. The company was indulged in window dressing wherein the financial position of the company was shown as more stable and reality. The performance was shown better by increasing the notional income, which the company never made. The quarterly results were manipulated and many thing else. Gradually, the company started reporting losses; however, the actual loss that the company was making was much higher than the amount reported to SEC. Of course, at this point the role of auditors were also questioned. As the company was flouting accounting rules, making irrational assumptions, changing accounting polices but the auditor was silent and the impact of such changes in spite of being material was never disclosed in the quarterly or annual reports. According to Adu-Gyamfi (2016), the US authorities had investigated all such reports and it was conclude that the integrity of the auditors was compromised, rules of accounting was not followed and all lead to major failure rather collapse of the company.
Arthur Andersen LLP
The name Arthur Andersen, every auditor knew. One of the big 5 competing with auditing giants like PWC, Deloitte, EY and etc. The auditing firm was best of them in its times providing services relating not only to auditing and accounting but host of other services like consultancy, legal advice, tax services, due diligence etc. The firm has been chosen because it is an audit firm and it gives an example of what can happen if the firm itself is engaged in the fraud. The firm audited financials of one of the energy company named Enron. The firm was found to be indulged in hiding the fraud of Enron Energy. It has been alleged that the management and the auditors have conspired to make false entries, adjustments in the books for their personal benefit. As noted by Dragomir (2019), the committee formed to investigate into the actions of the auditors submits its reports wherein it has been specifically stated that evidence have been fond for indulgent of the auditors in the corporate scandal of Enron. Although the firm fought for its existence until the last however, it had to surrender the license for practice and the firm was dissolved. According to Basioudis (2019), the collapse Arthur Anderson clearly shows the important of integrity in the field of auditing.
One Tel
One Tel is a largest telecommunication company of its kind in Australia. The company has been chosen to show that accounting is not the main reason behind corporate collapse however, bad business decisions, overlooking of the auditors expert recommendations and other factors are also equally responsible for corporate collapse. In this company, it provides headset and internet services, calling services to its customers. As noted by Munshi (2018), mainly the young generation was its target customers. The company became one of the largest telecomm company of Australia in 2001. However, it began to over purchase spectrums from the government, leading to cash crunch and losses. However, its directors did not gave up and began acquisition of other companies. Now at this point, the auditors recommended that already the company has made huge investments and the performance of the company is not in a position to make more such acquisitions. Further, the issue of right shares will also not assure the company to be afloat to run its business. However, the directors did not take the recommendations of its auditors and continue to make investments leading to cash crunch and losses in its books. The going concern was question of the company. Auditors needs to report the same. Investors loosed its confidence and finally the company was liquidated.
In all three scenarios, what is most important is the role of auditor. Although in first two cases, the integrity and ethics were compromised but in last case, the corporate was collapsed because of the wrong decision of the director. However, the auditor was aware of everything and it is his responsibility to report the same for the investors and other stakeholders.

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