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ABC listed company is considering to engage EA LLP as external auditor and IA LLP as internal auditor.
One of the son of the EA LLP audit team worked as a Financial Analyst in ABC listed company,
One of the spouse of IA LLP internal auditor is a shareholders of ABC listed company.
In such scenario, would these 2 parties consider as self interest threat and lack of independence and objective to ABC company.Thank you.
For the son, it rather depends on when his employment ended. If it is still on-going there is a self-interest and familiarity threat (the auditor wouldn’t want to get his/her son into trouble and probably things the son as being infallible).
I don’t think the spouse example matters much. IA reports are unlikely to be of much consequence to the spouse as a shareholder.
Thanks for the answer.
i came across the Question said the son of External Auditor held a position of Sales Manager. And no Safeguard required as Sales Manager would not be involved in Financial Statements Preparation. Does that mean we need to determine the Post of the related person before safeguard take into consideration?
Internal audit’s scope of work is more of internal control environment or work required by Management. It’s not so important that any siblings/relatives/spouse has share dealings or hold position in ABC listed company.
Is my understandings correct?Yes. Someone working as a sales manager is unlikely to have any influence over the financial statements. But even that situation might hold threats: the auditor wants the son to have a job and that might not be the case if the son’s employer went into liquidation because of a qualified audit opinion. Each case has to be judged on its merits.
Your second point is correct.
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