- This topic has 6 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
Hi Sir
1. Is it correct that co’s audit committees should set their own policy on the types of non-audit works that can categorically be undertaken, those that are categorically prohibited and those, which will require a case-by-case examination by the board or audit committee?
2. Are all non-audit works strictly prohibited, by the Sarbanes Oxley Act, for external auditors or just a selection?
Thank you
Apologies, I also meant to ask:
When a task requires us to: ‘Discuss the threats to auditor independence in this case and identify measures that would have helped reduce these threats.’
And the case study embeds points, which point to both governance failures, by the client and policy omissions/failings by the audit firm – can we suggest measures, which could have helped reduce independence threats, which involve actions/policies that could have been undertaken by the client being audited and by the audit firm themselves?
I ask, because an excerpt from the mark scheme (‘The company should have a clear policy regarding auditor rotation, as required by governance regimes’) suggests that we should, if relevant, recognise that there are provisions, which can be made by the company itself, to help safeguard auditor independence?
And the last part of the Q was:
In the above task (‘Discuss the threats to auditor independence in this case and identify measures that would have helped reduce these threats.’) – are we being asked to consider what could have been done to reduce the threats from ever having materialised in the first place or how to reduce the effects of the risk?
What I mean is, is the task asking us to consider what measures could have been in place to have prevented professional boundaries being crossed, low-balling prices being charged and excessive periods without auditor rotation occurring or;
Is it asking us to consider, given that all of the above incidents post threats to auditor independence, what could have been done, thereafter, to limit the risk of auditor independence being compromised, then causing audit failure?
I ask because when I originally answered the question, I suggested measures such as engagement quality control review being performed due to the self-interest and familiarity threat to independence and I’m not sure if the question was looking for measures which would have helped prevent the threats from transpiring in the first place, rather than dealing with the consequences of the threat?
These questions seem more relevant to AAA than SBL.
If you are talking about a question in a specific exam paper, please say which ine it is when you repost.
Hi Sir
The question is from the Kaplan exam kit for SBL (2019 – June 2020). It’s called CC & J and it’s from the ‘Organisational Control and Audit’ part of the syllabus (F). Apologies, but the paper it was taken or adapted from, has not been given, but it is an SBL syllabus question.
Apologies, I know there were a lot of posts I made there and so:
In terms of my very first post, those questions related to a line in the mark scheme, to the same question (CC & J), which reads: ‘It is well known that Sarbanes-Oxley specifically prohibits non-audit work for financial auditors demonstrating the importance of the issue in global governance.’ Whereas, I have read, from other sources (from Google searches – hence I am not sure about how reliable and updated those sources are) that the S-O prohibits some, but NOT all types of non-audit work, for example, tax calculations and returns are permitted and so I wasn’t sure?
And for the second post – relating to the same question (CC & J) – I suppose I was just wondering, when asked what could reduce the threats to auditor independence, if we should cite measures that both the company commissioning the audit and the firm performing the audit, could do – as this is what appears to be the case in the mark scheme – they suggests measures which the audit client and practitioner could have employed?
In the final post – relating to the same question (CC & J) – I was trying to gauge what angle the examiner wants us to approach the task from? I wasn’t sure whether we should try to stipulate what could have prevented the auditor independence ever being threatened or, whether, once independence was threatened what measures could have been discharged to protect collective auditor independence and quality, by implementing subsequent safeguards to enable the audit firm and team (plus any additional persons, like an engagement quality control reviewer) to generate a reliable, independent opinion on whether the financial statements were faithfully representative, or not?
Thank you
I have checked the syllabus and study guide and I am sure from what you are saying about this question that the question is inappropriate for the SBL syllabus. This syllabus is centred on a company and its problems, not the auditors and their problems. Non-audit work and the SO Act are primarily a problem for the auditors.
Similarly, it is the auditor’s duty to ensure they are independent.
This does not seem to be an ex-exam question and was probably included by Kaplan (inappropriately in my opinion) as a shortcut to boosting their exam kit.
I don’t think you should waste time on it.
- The topic ‘Prohibited Non-Audit Work’ is closed to new replies.