Management responsibility

Here are some points to remember:
1. Independence has two aspects (i) “being” (i.e. independence of mind) and (ii) “being seen” (i.e. independence in appearance) … to be free of any interest that might compromise integrity or objectivity.
2. To assume management responsibility – e.g. for the financial statements, for internal controls, etc is a threat to independence and must be avoided. (Because the auditor must report independently to the shareholders on the financial statements, etc that are management’s responsibility.) This does not mean that the auditor cannot do anything to help management – it depends on what it is – the extent of any threat – and whether safeguards can reduce it to an acceptable level. So take for example bookkeeping services for a PIE – the Code consider that NO safeguards that this would pose to an acceptable level – so it’s a “nocando”.
Re Connolly and the request to provide a guarantee on the loan extension – this would be financial interest (self-interest threat). The ACCA’s original published answer does not mention any other specific threat in this case – so I don’t know where advocacy and management responsibility come from. The Code suggests that an intimidation threat could arise (management couldn’t threaten the auditor with exposure of the financial interest).
The implementation of IT systems is management’s responsibility which is a “nocando” for a PIE client if the systems “(a) form a significant part of the internal control over financial reporting or (b) generate information that is significant to the client’s accounting records or financial statements on which the firm will express an”. For a non-PIE client, there would obviously be a self-review threat also in this case but, with appropriate safeguards, it is not banned outright. Such safeguards would not only include management’s written acknowledgement of its responsibilities but also have to include management assigning responsibility to a specific person with competence to take decisions on the system design/implementation.