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Hurling Co’s finance director has informed the audit engagement partner that one of the
company’s non?executive directors (NEDs) has just resigned, and he has enquired if the
partners at Caving & Co can help Hurling Co in recruiting a new NED.
Specifically he has requested the engagement quality control reviewer, who was until last
year the audit engagement partner on Hurling Co, assist the company in this recruitment.Could you explain how this would be a Self Interest Threat and not a Familiarity Threat.
As the published answer says:
“This represents a self-interest threat as the audit firm cannot undertake the recruitment of members of the board of Hurling Co, especially a NED who will have a key role in
overseeing the audit process and audit firm.”Self-interest arises because the NEDs role is one of oversight – and NEDs (e.g. on an audit committee) will make recommendations to the board on the effectiveness of the audit firm and the services they provide, etc. Familiarity can’t have arisen (yet) because the audit firm may not know the NED in any capacity.
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