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Stark Co. (From ACCA Study Hub).

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Stark Co. (From ACCA Study Hub).

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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    Posts
  • June 22, 2024 at 6:45 pm #707536
    VikasK
    Participant
    • Topics: 98
    • Replies: 118
    • ☆☆☆

    Greetings Tutor, I hope you are doing well.
    Can you please help me with the following question-

    You are a manager in the audit firm of Ali & Co, and this is the first time you have been assigned the audit of one of the firm’s established clients, Stark Co (Stark). The main activity of Stark is providing investment advice to individuals on retirement planning, purchase of shares and securities and investing in tax-efficient savings schemes. Stark is regulated by the relevant financial services authority and is considered a public interest entity.
    Mr Son has been the audit engagement partner for Stark for the previous nine years and so has excellent knowledge of the client. Mr Son has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.

    Q) In relation to Mr Son holding the role for nine years and his request that his daughter be part of the audit team, which of the following safeguards should be implemented in order to comply with ACCA’s Code of Ethics and Conduct?
    a) Ali & Co. should resign from the Audit.
    b) An Independent Review partner should be appointed
    c) Mr Son should be removed from the Audit Team
    d) Mr Son should be removed if his daughter is part of the team.

    The correct answer is Mr Son should be removed from the audit team.
    Tutorial note: Mr Son should be removed from the audit team as he has been a key audit partner for longer than the permitted seven-year period. Also, to show complete independence, Zoe should not be part of the audit team. However, if Mr Son is no longer the engagement partner then this removes the ethical threat and Zoe could be included in the audit team.

    My Doubt –
    1) The scenario clearly mentions that “this is the first time you have been assigned the audit of one of the firm’s established clients, Stark Co (Stark).” So based upon this, doesn’t it imply that the previous Engagement Partner Mr. Son has been rotated off the Audit Team.
    So, why are we again mentioning that “Mr Son should be removed from the audit team”.

    2) And as Mr. Son proposes his daughter Zoe to be part of the audit team this year, wont it would be better to have an Independent Review partner to review her work to ensure Zoe works are not favouring the client (as she might have done that purposely because of a long familiarity of her father with Stark Co.)

    June 23, 2024 at 6:03 pm #707555
    Kim Smith
    Keymaster
    • Topics: 134
    • Replies: 8304
    • ☆☆☆☆☆

    1) No – it says you are an audit manager – you have not been elevated to the heady heights of engagement partner status.

    2) You have to select from the options given and only C is correct. B might be an ADDITIONAL safeguard if Zoe is part of the team, but it doesn’t reduce the threat of Mr Son remaining audit partner to an acceptable level – he has to be removed.

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