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- This topic has 3 replies, 2 voices, and was last updated 3 years ago by Kim Smith.
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- January 19, 2021 at 12:10 am #607049
Hello Sir,
Hope you are keeping well!
Question :
You are an audit senior of Bark & Co and have been allocated to the audit of Foliage Co, a listed
company which has been an audit client for eight years and specialises in manufacturing musical
instruments. Jane Leaf was the audit engagement partner for Foliage Co and as she had
completed seven years as the audit engagement partner, she has recently been rotated off the
audit engagement. The current audit engagement partner has suggested that in order to maintain
a close relationship with Foliage Co, Jane Leaf should undertake the role of Engagement Quality
Control Reviewer this year. The total fees received by Bark & Co for last year amounted to 16% of
the firm’s total fee income. The current year’s total fee income for audit, non?audit and tax
services is expected to be greater than last year. The audit manager for Foliage Co has just
announced that he is leaving Bark & Co to join Foliage Co as the financial controller.
A – Which ethical threat will be created when the audit manager commences employment
with the client and what action should be taken to manage the threat?
Threat Action
A
Intimidation The manager should not be allowed to take the role of
financial controller
B
Familiarity The composition of the audit team must be reviewed and
changed as appropriate
C
Confidentiality The manager should not be allowed to take the role of
financial controller
D
Self?review The composition of the audit team must be reviewed and
changed as appropriate
? Option A
? Option B
? Option C
? Option D
My question – In answer it is written that this is familiarity threat but as per my understanding shouldn’t it be a self review threat ? and if not then why ?Thanks in advance!
January 19, 2021 at 7:31 am #607101Imagine … you are the audit senior and you go to audit your client and … what a surprise! The client’s financial controller is your former boss!!! Happy days!!! You can have a good chat about …. etc, etc.
There can be no self-review threat the audit manager is going to the client – it is not the former financial controller who is now the auditor.
(Can I ask you please to make subject lines more specific – eg “Kaplan Q [Name]” – that will help students search if they have questions on the same question.)
January 19, 2021 at 3:51 pm #607183Yes sir , sure I will take care of this next time
January 19, 2021 at 5:12 pm #607197Thank you!
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