MOQ 12 Sept 2016

Dear Ken,

I don t completely understand the answer provided for the question MOQ 12 Sept 2016

The scenario says:
The previous audit manager, who is close friend to the new audit manager, left the firm before the completion of the previous year audit and now is the director of Fir Co.

Which of the following identifies the threat which could arise as result of financial director previous employment at Sycamore Co and recommend an appropriate safeguard.

B familiarity threat: a new audit manager should be appointed
D familiarity threat: a firm should resign from the engagement.

(A&C were about Self Review therefore no relevant here)

The correct answer is B with explanation that as familiarity is not severe the firm should not resign but only a new audit manager should be appointed.

My understanding is that with option B resolves the familiarity relationship between the auditor manager and director, however this does not eliminate the threat arise when the audit Partner join the client. Shouldn t the direct resign and join and be reappointed only after 2 years?

Please, help me to clarify above doubt.

Thanks and Regards

Gabbi