Integrity

With the issue of omission of income, this will affect the client company (as a whole),
its directors and staff, and users of the financial statements---which include the tax
authorities. Clearly, it is a dishonest act and should not be overlooked but be examined
and investigated. Under the law, profits incurred either through operations and outside
operations of a company should be properly accounted for. This issue will not only affect
those people/authority, but also the firm, given the connection and its reputation.

Objectivity
To maintain objectivity, we should only discuss the matters with the key affected
parties of the company: the fellow partners, the client company, its company directors
and staff and the users of the company documents/accounts (like the tax authority in
the case of the Philippines, the BIR). Upon resolution of the conflict, it is wise to not
disclose any information with the staff of the client- in particular, hose who may be
involved with the improper accounting of sales.

Professional Competence and Due care

As an auditor, it is our responsibility to ensure that the provided financial information
is in accordance to the accounting standards in the Philippines or to any applicable laws
and regulations. In this case, knowing that there is an omission of an income in the
company he must inform the authorities and correct the system used by the company by
making sure that all principles and policies are applied.

A manifestation of this is determining the extent of the improper accounting of sales

in the financial statements in prior periods; once determined, it is best to adjust the
amounts to reflect the amount in accordance with the prevailing principles in the
profession. Then, upon gathering the new information, we should give an advice to the
directors in relation to the staff sales policy to ensure that these are fully recorded in the
accounting system. Modification of the system currently employed for controlling staff
sales and funding the staff Christmas party is imperative to produce quality statements at
par with the technical and professional standards in the profession.

Professional Behaviour
When the issue has been brought to our awareness, it is important that the concern
should be put forward to the client companys directors. We will also have to verify if it is
plausible that the financial statements of the previous years could be misinforming. To
uphold the dignity in our profession; we should explain to the directors the repercussion
of the actions by the staff, its magnitude, and our cause in resolving the matter ---to
safeguard the companys interests. If they are willing to cooperate, we can recommend
such improvements or modifications in their sales and accounting system and the proper
rectification for the discrepancies in the past financial statements. If not, our firm is obliged
by our conduct of professional behavior to withdraw from the engagement with the
uncooperative company and notify the respective authorities of the clients behavior
(through whistleblowing). Take note that proper documentation should be done to provide
as an evidence to support our ethical judgment.