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Hello sir
can you please guide me through the 3rd question of alan marshlows appointment
answer says self interest and self review
self interest – is it due to the fee he might be getting as NED
self review – why is it threat
why not familiarity is not a threatSelf-review arises because EQCR reviews the audit on the financials and those financials reflect management’s stewardship of Plant Co – if Alan is a NED of Plant Co he would be part of that stewardship.
The definition of familiarity threat is “the threat that due to a LONG or CLOSE relationship with a client … a professional accountant will be too sympathetic to their interests or too accepting of their work”. Based on the information given Alan’s relationship as EQCR is only two years and he has no close relationship with any individual at Plant Co (that we know of).
Sir sorry but I had confusion again with self review..he already finished his term as eqcr right.. now he is going to cease that and become NED ..
Self review arises when auditors review their own work .but he no longer is part of auditBut he’s still a partner of the firm that is auditor to Plant Co. Threats to independence need not be actual – they can merely be perceived – how would it look in a business news headline “Partner of audit firm Horti & Co sit on board of audit client Plant Co”.
So given that no safeguards would be sufficient to overcome this threat to independence, the firm would not in fact resign, Alan Marshlow would decline the offer of a position as NED.
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