Ethical Decisions for Audit and Assurance Engagements
Before taking on a new client relationship, professional firms in public practice need to
ascertain if the acceptance would adversely affect pliability with the essential principles of
practice (Association of Chartered Certified Accountants, 2020). Potential threats to moral or
professional behaviour ascend from, for instance, uncertain matters allied with the client, its
owners, management or activities (Association of Chartered Certified Accountants, 2020;
Vallence, 1995). This denotes that professional audit and assurance firms, when approached to
take on a novel client, should investigate the prospective client, its owners, and business
activities to appraise any questions regarding their moral conduct which has potential to create
unacceptable risk. These fact-finding actions also comply with anti-money laundering
regulations and are generally performed as ‘customer due diligence‘ or ‘know your customer’
procedures. This paper presents arguments for and against supporting a decision to accept an
audit client and, based on the identified and most persuasive argument regarding the client’s
acceptance, provide a recommendation for the given ethical case. The paper is structured in style
with headings for each thought of an idea, starting the case analysis highlighting the facts of the
case and the point at issue, and later arguments for and against accepting the new client
engagement are discussed.
Case Summary and Point at Issue
Tammy Potter, a new partner with the local professional accounting firm, Tower &
Tower, was just selected to the board of directors of a resident civic association for which the
chairperson is Lewis Edmond. The latter owns a real estate development firm, Tierra
Corporation. Lewis Edmond indicated that his corporation needed audit and assurance services
to obtain financing to acquire another concern. The issue is whether the professional accounting
firm, Tower & Tower, should agree to take the new client?
Arguments for Accepting the New Client Engagement
Audit and assurance engagements often involve varying risks depending on the case. In
most circumstances, audit professionals should not deny accepting an engagement but take an
additional risk by designing a more detailed audit program with adequate safeguards to
potentially reduce and help their client with the identified threats to acceptable levels and raise
the audit fee accordingly. The quality control strategies necessitating a scrutiny of new
customers and approval by the managing partner, Lee Tower, including Potter’s obtaining the
endorsement from the client, to make the requisite investigations for the new client support in
planning and designing the audit program, thereby reducing on certain inherent risks for taking
