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When an audit takes on a new client, what are the 3 key procedures they have to consider to reduce the risk.
What would you suggest?
Why are there 3, not 2, 4 or more? Sounds like a question you’ve been asked to answer.
I would suggest the 3 are:
Self interest threat
Firms competence to perform potential work
Ethical threats
Familiarity threat
Advocacy threatBut Im not really sure what the 3 key threats are
You were asked for procedures not threats.
I do not like the way the question suggests that there are precisely three procedures (the use of the word ‘the’ in ‘the 3 procedures’). There are many procedures that can be followed to reduce risk:
Write to outgoing auditors.
Ensure it is legal and ethical to act
Investigate the client and directors
Gain an understanding of the client
Plan carefully
Consider the composition of the audit team
etc
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