Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Audit firm appointed as internal and external auditor
- This topic has 1 reply, 2 voices, and was last updated 5 years ago by Ken Garrett.
- AuthorPosts
- June 24, 2018 at 12:49 pm #459958
Hello
If there is an ethical threat given in a scenario that “Audit firm is appointed as internal and external auditor .”
For its explanation would it be correct to say that “This constitutes self-interest threat if audit firm provides an internal audit service to an audit client .”
And its safeguard that “Audit firm should ensure that audit team is not involved in IA service and that client staff remain responsible for IA activities.”
June 24, 2018 at 3:05 pm #459960Yes, but say why it is a self-interest threat ie you do not want to criticise colleagues. Also is can give rise to self-review (checking own work) and familiarity threats (professional skepticism is difficult to maintain when you know people well)
Your solution OK but could be fuller. Should say: The audit firm should ensure that audit team is not involved in IA service and that a different and separate team should be used for IA activities. To avoid assuming management responsibility the client must designate an appropriate and competent manager to be responsible at all times for internal audit activities and to acknowledge responsibility for designing, implementing, and maintaining internal control. For public interest clients, internal audit work performed by external auditors should not relate to material elements of the financial statements.
This is probably more than would be expected for the likely marks available.
- AuthorPosts
- The topic ‘Audit firm appointed as internal and external auditor’ is closed to new replies.