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Hello Kim,
The Code specifically states that if a partner or employee of the firm serves as a DIRECTOR or officer of an audit client, the self-review and self-interest threats created would be so significant that no safeguards could reduce the threats to an acceptable level. Accordingly, no partner or employee shall serve as a director or officer of an audit client.
1. Is the DIRECTOR mentioned in the above paragraph indicating EDs only or both EDs and NEDs?
2. An audit partner being appointed as an NED and serve on the audit committee of the client. Is it going to create self-review threat? If so, why?
Thank you.
Regards,
MarthewThink about the role of the audit committee and its responsibilities … e.g. recommending the (re)appointment and remuneration of the auditor and monitoring the external auditor’s independence and effectiveness of the audit process.
Could the audit partner (or a member of the audit team) also be a NED of the audit client?
(Answer – no)
Hello Kim,
Thanks for the clarification.
Regarding the self-review threat, does it mean that the audit partner sitting in the audit committee is going to review the independence of the audit firm where the audit partner belongs to?
How this is going to affect the independence of the audit firm?
Thank you.
Regards,
MarthewThe Code is saying that the audit partner cannot wear two hats – he cannot bat for the audit firm and bat for the audit client.
The audit partner would communicate to the audit committee and discuss, for example, KAMs – it makes no sense that this is communicated to himself.
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