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Ethics, professional issues and QC

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Ethics, professional issues and QC

  • This topic has 2 replies, 2 voices, and was last updated 6 years ago by hbwiza21.
Viewing 3 posts - 1 through 3 (of 3 total)
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  • April 17, 2019 at 8:28 am #513213
    hbwiza21
    Member
    • Topics: 53
    • Replies: 58
    • ☆☆

    1. When answering Ethical, Professional and QC questions, I am finding it hard in remembering what ISAs state or IESBA states. How can I overcome this in my answers? Do we loose marks for not saying “IESBA code states that….”

    Also, where can I find information of what non audit services are allowed. For example I did not know that ” you can not provide internal control review services which relate to a significant part of financial reporting ” Is this only for listed companies?, Is it only significant non audit services that are not allowed?

    2. I have also given my answer relating to JUST a part relating to an intimidation fee issue vs the ACCA answer (see below) – can you please point me in the direction if this would suffice?

    Question :

    You are a senior manager in Bunk & Co, a global audit firm with offices in more than 30 countries. You are responsible for monitoring audit quality and ethical situations which arise in relation to audit clients. Wire Co is an audit client whose operations involve haulage and distribution. The audit report for the financial statements of Wire Co for the year ended 31 December 2014 was issued last week. You are conducting a review of the quality of that audit, and of any ethical issues which arose in relation to it. Relevant information obtained from a discussion with Lester Freeman, the audit engagement partner, is given below.
    (a) Wire Co’s audit committee refused to agree to an increase in audit fees despite the company’s operations expanding into new locations. In response to this, the materiality level was increased during the audit, and some review procedures were not carried out. To reduce sample sizes used in tests of detail, the samples were selected based on judgement rather than statistical methods. In addition, only parts of the population being tested were sampled, for example, certain locations were not included in the sample of non-current assets selected for physical verification.

    My answer:
    The client has insisted on not paying the suggested increase in the audit fee, this gives rise to an intimidation threat. The matter should be discussed with the audit committee explaining that the increase in fee is due to the company expanding into new locations therefore increasing the amount of audit work to be performed. The matter should also be brought to the attention of TCWG.

    ACCA answer:
    When the audit client imposes fee pressure on the audit firm, an intimidation threat to objectivity arises. IESBA Code of Ethics defines the intimidation threat as when a member may be deterred from acting objectively by threats, actual or perceived, and gives an example of an intimidation threat where the audit firm is being pressured to reduce inappropriately the extent of work performed in order to match the fee they can obtain to the work performed. The matter should have been discussed with Wire Co’s audit committee, with the audit firm stressing that the new locations would lead to an increased scope of the audit, and therefore the fee should increase rather than remain the same. It should also be brought to the attention of Bunk & Co’s partner responsible for ethics.

    April 17, 2019 at 11:56 am #513238
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8274
    • ☆☆☆☆☆

    You don’t have to state the authority for your knowledge.

    You can download the code from here https://www.ethicsboard.org/
    (It is just part of this handbook) or alternatively download ACCA’s Code of Conduct and Ethics from the ACCA www. If you search of example on “no safeguards” you will find examples of things that are effectively prohibited as there are no safeguards that would reduce the threat to an acceptable level.

    Unfortunately I cannot provide guidance on individual students’ answers – every one would then want this service. There will, however, be an article coming out in May which you should find very useful. As soon as it’s available, I’ll make a post to the forum to alert students.

    April 17, 2019 at 7:22 pm #513299
    hbwiza21
    Member
    • Topics: 53
    • Replies: 58
    • ☆☆

    okay.. thanks Kim

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