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1) regarding taxation service. Why its not allowed to perform the service if safeguards are put in place as (it didnt mention in the q that its a listed comp)
Is it the issue here (before court) thats why its prohibited?
2) in the examiner answer its stated a partner not allowed to be a member of the board in the client comp.
Whats about if he joined the client comp after 2 years period ? Is it allowed?
( the issue here its not allowed to join the board only or the the whole comp)
1. Short answer is yes. Long answer:
It depends on the nature of the taxation services in the scenario, for example:
Tax return preparation – since this is based on historical information it does not generally create a threat as long as management takes responsibility for the information in the return.
Tax calculations – create a self-review threat (as they will be audited) – but this can generally be reduced to an acceptable level.
Tax dispute resolution (as in this scenario) is a good example of an advocacy threat. (Also a self-review threat if the firm advised on the matter that gave rise to the dispute – but that is not the case in this question.) The significance of an advocacy threat depends on whether the matter will be resolved before a court or tribunal. If yes, the auditor CANNOT advocate the client’s position if it is material to the financial statements – i.e. there are no safeguards that could be sufficient to reduce the threat to an acceptable level.
2. The point in case here is the suggestion that an audit partner accept a NED position – this would be in addition to, not instead of, his position in the partnership.
There is a “12-month rule” for the key audit partner of a PIE client – but this prohibition does not extend to other members of the audit team or other partners in the firm (as appropriate safeguards can otherwise be applied).Thanks v much for the explanation , still need to be clear of this points to get a full clear pic
significance of an advocacy threat depends on whether the matter will be resolved before a court or tribunal. If yes, the auditor CANNOT advocate the client’s position if it is material to the financial statements – i.e. there are no safeguards that could be sufficient to reduce the threat to an acceptable level.
1) what if the matter resolved after the court?
2) What if the matter was immaterial (is it allowed to provide the service)
Regardless if its before or after the court?
3) l didnt get the 12 months rule and not extending to other members. I would appreciate if u could explain the matter in other words.
Thanks v much
“before a court” means “brought in front of a court”. (If a matter has already been dealt with by the court there would no advocacy of the client’s position.) If it’s material, it’s a definite no you can’t (290.188 of ACCA’s Rulebook). If it’s not material, I think the auditor would still need to consider if there was a threat and if any safeguards needed to be put in place (as in 290.187). For more details than you will need in the exam, but it may help you in understanding, you can download the ACCA’s Rulebook from ACCA’s website https://www.accaglobal.com/us/en/member/standards/rules-and-standards/rulebook.html
By 12-month rule I mean that the key audit partner cannot accept a key management position with a PIE client unless he was not concerned with the audit of the financial statements for a period not less than 12 months – otherwise independence would be deemed to be compromised (290.137).
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