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The following scenario relates to questions 11 – 15.
You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.
Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.
In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark’s yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.
All & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.11. From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark.
(1) Mr Day would like his daughter Zoe to be part of the audit team
(2) Audit team to be offered a balloon flight
(3) Tax fee to be based on a percentage of tax saved
(4) Firm to represent Stark in a dispute with the tax authorities
Which of the following options best identifies the valid threats to independence and allocates the threat to the most appropriate category?
Advocacy– Intimidation– Self-interest
A (3) and (4) , (3) only , (1) and (2)
B (4) only, (3) only, (2) and (3)
C (3) only , (3) and (4), (2) only
D (3) and (4), (1) and (4) , (1) and (2)12. In relation to the audit team being offered a balloon ride:
Which of the following actions should be taken to ensure the firm complies with ACCA’s Code of Ethics and Conduct?
A .The gift may be accepted as Stark has taken appropriate measures to reduce the value of the gift compared to previous years.
B .The value of the gift should be assessed to determine whether it is of material value to the financial statements.
C. The gift should only be accepted if its value is trivial and inconsequential to the recipients.
D. Only the audit partner and audit manager should accept the gift.13. In relation to the audit engagement partner holding the role for nine years:
Which of the following safeguards should be implemented in order to comply with ACCA’s Code of Ethics and Conduct?
A. An independent review partner should be appointed to the audit.
B. The audit engagement partner should be removed from the audit team but may serve as a quality control reviewer.
C. Ali & Co should not audit Stark for a two year period.
D. The audit engagement partner should be removed from the audit team.15. Zoe is also concerned that All & Co might breach confidentiality were the audit firm to represent Stark in its dispute with the tax authorities.
Which of the following statements best reflects the auditor’s duty of confidentiality?
A. Auditors must never, under any circumstances, disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client.
B. Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to do so by the police or a tax inspector.
C. Auditors may disclose matters to third parties without their client’s consent if it is in the public interest, and they must do so if there is a statutory duty to do so.
D. Auditors may only disclose matters to third parties without their client’s consent if the public interest or national security is involved.But surely if you have the Qs from a legitimate source you have the answers also?
Yes it is from BPP revision Kit 2016-17 but i don’t understand it’s explanation. Thats why I posted here.
If you want help from fellow students you need to given them more to go on – you can’t expect them to have the book you refer to or the time to work out answers in order to provide you with an answer. You are more likely to get a response if you write separate queries about each of the Q stating what is the given answer and why you think it is something else and/or what it is that you don’t understand about the given answer.
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