PART A

a) As a chartered accountant providing audit service to clients, there are limitations on

non-audit service that may be provided to the same client on the same period/timeframe. As per the MIA By-law however, those non-audit service that may give rise to
independence threat are not explicitly listed/stated and left to the judgement of the
auditor themselves.
Hence, referring to the example case given, non-audit services that Laila should not
provide to her client are: (1) Search for and interview new personnel: self interest
threat, auditor tend to audit the work done by employee he employed lightly, as to
ensure the perception on the personnels competence is not compromised, hence the
recruit done by the auditor shall be considered of top quality. (2) Train Personnel:
self-interest threat, given that its the auditor who trains them, hence he/she may be
reluctant to point out their mistakes in a financial statement audit. This shall result in a
bad independence in appearance, to the financial statement users. (3) Monitor the
client-prepared source documents and make changes in basic IT-generated data
as Laila may deem necessary without concurrence of the client: self review threat,
due to auditor making changes without the knowledge of client IT-generated data.

b) Yes, Laila can accept the offer to develop the system is she is not qualified to do it
by herself, as this is clearly noted in the MIA By-law, under the category of
Professional Competence and Due Care. A member should not accept a job which
he/she is not competent to perform unless he/she obtains the necessary advice and
assistance to enable the task carried out competently.

c) In my personal view, an auditor should not be allowed to provide any other service
for their audit client. As this will give chance for numerous independence threats
(independence in fact) and causes doubts of financial statement user on the
auditors report due to the non-existence of independence in appearance as the
management operation and auditing (which are suppose to be independent both in fact
and appearance) are carried out by the same entity, hence give rise to self-review,
self-interest threat.
On the other hand, the MIA should adopt the step taken in the United States through
its SEC and Sarbanes-Oxley Act, where the non-audit services that are not allowed to

be performed for an audit client, is explicitly listed and not left to the judgement of
the auditor.
PART B
a) Yes, this situation involves violation of MIA By-laws. The provision of non-audit
services (internal audit services) to audit clients may create self-review and selfinterest threats. Therefore, establishing a non-audit service (internal audit)
department to provide audit service to audited client is not allowed as this will affect
the quality of the decision on whether the financial statement is unqualified/qualified.

b) No, this situation does not breach any MIA By-laws. The provision do not prevent
members providing service as public accountant to accept gift apart from the fee
charged, given that the amount or material value is not of significant amount and
is not a tool or instrument that may create or cause self-interest threat to objectivity.
Hence, it is the auditors duty to be sure of the nature, value and intent of the offer
before accepting it.

c) Yes, this situation is considered as a violation MIA By-law. The fact that Khairy was
convicted and sentenced prison time is an act that is termed as discreditable to the
profession. As quoted from the By-law been found guilty of before a court of
law in Malaysia

d) Yes, the provision explicitly explained that an auditor should not knowingly consent
to be appointed, and shall not knowingly act as auditor of any company if any
immediate member of his family is an officer, a partner, employer or employee of
the company. However, the immediate family member involved in the company is
limited to person having authority and responsibility for planning, directing
and/or controlling the activities of the company. Hence for this example Kelly Brent
should not accept the audit engagement as her sister (immediate family member) is
one of the top management in the company. Having accepting the audit
engagement will affect the independence in appearance of the audit job, as
Objectivity and Professional Independence is in doubt.

e) No, this situation is considered a violation of the MIA By-law as it explicitly prohibit
members from accepting appointment if within the past 24 months he or she has
been associated with the company directly, which in this case as an officer of the
company. This is to avoid any doubt in appearance and in-fact as there is a chance of
self-review threat. Basing on the example given, Hank Anderson should not accept
the audit engagement as he resigned from the company for a period of less than five
(5) months (April 20x6 - August 20x6).