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horti and co is planning its external audit of tree co. Yesterday, the audit engagement partner charlie thrower discovered that a significant fee for information security services which were provided to tree co by horti and co is overdue. Charlie hopes to be able to resolve the dispute amicably and has confirmed that he will discuss the matter with the finance director, percy marsh, at the weekend, as they are both attending a party to celebrate the engagement of charlie’s daughter and percy’s son
Which of the following statements correctly explains the possible threats to horti and co’s independence and recommends an appropriate safeguard in relation to the audit of tree co?
An intimidation threat exists due to the overdue fee and tree co should be advised that all fees must be paid prior to the auditor’s report being signed
A self review threat exists due to the nature of the non audit work which has been performed and an engagement quality review should be carried out
Why the above two statements are not correct
Overdue fees are often described as “akin to a loan”. So there is a financial interest that creates a self-interest threat.
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