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Hi,
I am a little confused regarding the ethical threat of assuming a management responsibility. I have read some answers state that there are no safeguards which could reduce this threat to an acceptable level. However, some answers then go on to specify how to reduce this threat, such as getting the client to confirm they assume responsibility and accept the results.Would you be able to clarify this?
Any help appreciated!
Thanks
MikeThe Code says “A firm shall not assume a management responsibility for an AUDIT client. The threats created would be so significant that no safeguards could reduce the threats to an acceptable level.” This means that the auditor cannot, for example, authorise company transactions, hire/dismiss employees of the company, assume responsibility for the preparation of the financial statements, assume responsibility for internal controls.
It goes on to say “To avoid the risk of assuming a management responsibility when providing NON-assurance services to an audit client, the firm shall be satisfied that client
management makes all judgments and decisions that are the responsibility of
management.” So, for example, the audit firm can provide recruitment services to an audit client – but any decision to hire must be management’s alone.
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