Adibah binti Ismail

Annastasia Luyah anak Henry

Farhani Arini binti Pendi

Nor Aina binti Nasrol

Background of case :

This case is based on Smart Investments Limited, an investment company whereby Ted was the
manager and Carl the partner on the audit of the company. This company’s shares were traded on the
NASDAQ exchange. They were discussing about the issues for the upcoming Audit Committee meeting
to finalize the financial statements and audit for the current year. The issues are arise from the company
itself whereby they does not disclose certain information and about their subsidiary company.

Issues of case :

There are 3 issues in this case as mentioned by Ted, the manager discussed with Carl, the auditor. First
issue is that the company has made 55% of its profit from the trading of derivative securities so it bring
high risk but the information did not being disclose. The company are going to argue that they are
uncertain how much profit relates to derivative securities trading and how much was realized as the
derivative securities were part of hedging transaction to protect foreign currency position.

Next issue related to their client, Bonvest Mutual Funds that bring concerns of their reluctance to reveal
the potential lawsuit whereby the company have messing up the timing and placement of orders for
several mining securities that should be mentioned in the accounting statements under contingent
liabilities note but they argue that Bonvest will set the figure as the lower bound for their claim.

Last issue is about one the company subsidiary, Carribbean Securities Limited being audited by
Bahamian firm of Dodds & Co. and there is no qualification of the audit opinion since the firm is not their
own affiliate so the company just let the subsidiary company going broke.
Step 3

The Question Thoughts Ethical or Not Ehical

Is the decision profitable?
Is the decision legal?
Is the decision fair to decision
maker(Audit firm) &
stakeholders?
Is it the right thing to do?
Does the proposal provide the
highest benefit to all & would it
be benefit stakeholders in
future? Would it bring about
future sustainability? Is it
sustainable development?

The-5 questions by Graham Tucker