The 15% cap

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February 6, 2017 at 9:26 am #371292
saqlainrattansi
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Just wanted to ask what is the difference between receiving more than 15% of your revenue from one client if the client is

1. Listed

2. Unlisted

So like would there be different responses to the client exceeding this limit based on whether they are listed or unlisted? If so, could you outline the different scenarios and responses?
February 6, 2017 at 2:02 pm #371335
Ken Garrett
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No specific figure is mentioned for unlisted. Auditors have to satisfy themselves that there is no undue influence ie a threat to objectivity and independence arising from fees.

The 15% applies to public interest clients (such as listed).
February 6, 2017 at 2:05 pm #371337
saqlainrattansi
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I see. Umm, what happens after the 15% limit is crossed for limited companies? From what I’ve read, the auditor needs to disclose this information to the users of the audit report right?

Also, on a separate note, why is the chief internal auditor not supposed to be in the audit committee
February 6, 2017 at 5:36 pm #371358
Ken Garrett
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The ACCA rule book states 290.217:

Where an audit client is a public interest entity and, for two consecutive years,
the total fees from the client and its related entities …….represent more than 15% of the total fees received by the firm expressing the opinion on the financial statements of the client, the firm shall disclose to those charged with governance of the audit client the fact that the total of such fees represents more than 15% of the total fees received by the firm,
and discuss which of the safeguards below it will apply to reduce the threat to an
acceptable level, and apply the selected safeguard….

So disclosure is to the audit committee/board, not the shareholders.

The audit committee has a supervisory role and its independence would be compromised by having the chief internal auditor on it. They might have to criticise IA.
February 7, 2017 at 7:32 am #371447
saqlainrattansi
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Oh thanks for your help! I’m kicking my revision up a notch you can expect me on here more often!
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