If John were not Annes brother in this case, but he had a huge personal stake such as his only savings in a certain client, he would still be in breach with the fundamental principle of objectivity; self-interest threatens his independence as an accountant in this engagement. The undue influence in this case comes from Annes instructions to John to modify the financial statement in order to make it impressive from the banks point of view. What distinguishes this from bias and conflict of interest is that John could committed this fraud according to his own discretion: by being Anne's brother who wants to help her in the business--bias, or conflict of interest that arises from his direct financial interest in Armidale Hardware.
Therefore, John has also acted under undue influence of others, which has impaired objectivity when it comes to the practice of his profession. Johns actions in this case has breached three of the five fundamental principles of APES110. Aside from integrity and objectivity which have been discussed previously, John has also breached professional behaviour. According APES110 Section 150, “ The principle of professional behaviour imposes an obligation on Members to comply with relevant laws and regulations and avoid any action or omission that may bring discredit to the profession.
This includes actions or omissions which a reasonable and informed third party, having knowledge of all relevant information, would conclude negatively affects the good reputation of the profession (2006, 13). ” The informed third party in this case is the bank, which would find out the relationship between Anne and John, with John as the accountant that prepared the financial statement that is provided.
Since the bank will find out the relationship between Anne and John, the bank may conduct some investigation with regard to the accuracy of the financial statements. If it has been found out that John fabricated the company's financials in order to trick the bank into providing it a loan, John will have to face significant legal charges as well as negative publicity as an accountant.
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