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Ms, under the IESBA Code of Ethics, what is the difference between these two threats:
Serving as a director or officer of an audit client” and “Employment relationships with an audit client” as the serving as director/officer of an audit client is essentially employment with audit client?Thank you.
As it states in section 524 – employment with an audit client concerns:
– A director of officer;
– An employee in a position to exert significant influence over the preparation of the client’s accounting records or the financial statements on which the firm will express an opinion.As you say – directors/officers are essentially employees – but not all employees are directors/officers.
How do we differentiate the situation of these two if the involvement will be a director,whether it will be under” serving as director or officer of an audit client” or “employment with audit client”?
“Serving as a director or other officer [e.g. company secretary]” concerns the same time frame for which the audit firm is an auditor. (“Serving” is present tense rather than “served” or “will serve”.)
For employment, the requirements of the Code start with:
“A familiarity or intimidation threat might be created if any of the following individuals
HAVE BEEN been an audit team member or partner of the firm …”
i.e. past tense – so it is considering when an individual has LEFT the employment of the audit firm to be employed by their former audit client.This is clarified as it goes on to say:
“The firm shall ensure that no significant connection remains between the firm and:
(a) A former partner who has joined an audit client of the firm ….”
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