Threat on audit firm recuritement services

This is what it says in the Code:
“Providing recruiting services to an audit client may create self-interest, familiarity or intimidation threats. The existence and significance of any threat will depend on factors such as:
• The nature of the requested assistance; and
• The role of the person to be recruited.”
It goes on to say:
“A firm shall NOT provide the following recruiting services to an audit client that is
a PIE with respect to a director or officer of the entity or senior management in a position to exert significant influence over the preparation of the client’s accounting records or the financial statements on which the firm will express an opinion:
• Searching for or seeking out candidates for such positions; and
• Undertaking reference checks of prospective candidates for such positions.”

Generally, if something is a “prohibition” for a PIE it should be regarded as a threat for non-PIE clients also (and will need safeguards).

The position of FD clearly poses a threat (responsibility for financial statements) as does the oversight role of NEDs. Consider, for example, that NEDs on an audit committee assess the independence, objectivity and effectiveness of external audit (see page 14 of the notes) – hence the auditor would have self-interest if instrumental their recruitment.

An auditor – Jo – advises an audit client – ExCo – that Bert is the ideal candidate for a finance director position, say. Bert turns out to be useless/unethical/something that is a problem – Jo would like to talk to the managing director about an inappropriate accounting treatment. “But … ” says Bert (or the managing director) – “you can’t qualify the audit opinion – you must agree with Bert’s treatment because you said he was the best candidate for this position”.

You’re very welcome!