Mar/Jun16 Q4(b)Chennai

1. But that’s the point – what is meant by “a review”? To what end? The scenario goes on to say that controls have deteriorated – so could the audit committee be asking for a review of the design of controls? You should appreciate that for 10 marks you need to find points to discuss – the audit committee cannot be asking “merely” for a review to determine the operating effectiveness of internal controls (because that’s part of the audit which has just been completed). So – as for any non-audit assignment – one of the first things you need to confirm is what exactly as it that you are being asked to do? And what are the potential threats associated with it.
2. No – for lots of reasons. Consider:
– it’s a requirement of ISAs (ISA 265) – so it’s just possible that the IAASB considered whether the requirements conflict with the code of conduct (they don’t)
– the letter specifically restates management’s responsibilities for the financial statements and internal control (as stated in the letter of engagement and reported in the auditor’s report) and
– for the removal of any doubt, the code states:
“Providing advice and recommendations to assist the management of an audit client in discharging its responsibilities is not assuming a management responsibility.”
3. Think about what is meant by internal audit – if Mumbai had an internal audit function “a review of internal controls” would fall within it’s remit. Presumably it hasn’t (otherwise it wouldn’t be asking external audit to perform this) – which raises lots of issues for corporate governance (though more relevant to SBL than AAA). So what the answer is saying is that if the requested review is one that might otherwise be carried out by internal audit and it relates to controls over financial reporting (which it does because it mentions fraud risk) then the external auditor is being asked to provide an internal audit service.
(The Code says: Internal audit activities might include:
• Monitoring of internal control – reviewing controls, monitoring their operation and recommending improvements to them ….)

I recommend to any student preparing for AAA to download the ACCA Code of Ethics. The version relevant to the March/June 2020 exams is Part 3 of the 2018 Rulebook (effective 01/07/18) and is available here
https://www.accaglobal.com/gb/en/about-us/regulation/rulebook/rulebook-archive.html

The pdf is easily searched and is a very useful reference.

I can only suggest that the difference is because in Chennai you are specifically told that Mumbai is listed.

You should see that generally, if any specific considerations of listed status are likely to be relevant, the Q will prompt that entity is listed.