For self interest threats, ie a financial interest in entity, the safeguards are dispose of interest/remove from team and independent review/reperformance. Does this mean review/reperform work of the whole team, or only the work of the individual who had the financial interest?
Ask the Tutor ACCA AAA
Ethical Safeguards
25d ago#1Hello again Claire!
It is helpful to distinguish between ELIMINATING/AVOID the threat - e.g. dispose of the interest and SAFEGUARD against it - an action that reduces the threat to an acceptable level. So in this case, since it is the holder of the financial interest who could gain (e.g. if profits overstated, dividends may be increased), it is their work that should be reviewed.
The Code PROHIBITS direct financial interests by engagement and other key partners - e.g. the relevant tax partner of an EQ reviewer for a listed entity. For the most junior of staff, the threat may be assessed as so low that their does not require additional review beyond that which would be expected in the review of their work by a senior member of staff. (That said, most audit firms prohibit any professional staff, including secretaries, from holding financial interests and require them to confirm this in an annual independence declaration.)
The "grey" area, where professional judgement comes in is the level of staff in between and would also consider factors such as whether the client is listed and the absolute and relative size of the interest.
Sign into reply to this topic.