- 20 Marks
AA – Nov 2015 – L2 – Q4 – Professional and Ethical Considerations, Regulatory Framework and Audit Responsibilities
Identifying threats to independence, resolving those threats, and determining whether to accept an audit appointment.
Question
You work for a firm of accountants and auditors which has eight partners. The audit firm has been invited by the Managing Director (MD) and majority shareholder of Wellbeing Co. to accept appointment as statutory auditor of the company, replacing the current firm of auditors who will not be re-appointed.
The principal activity of Wellbeing Co. is the manufacture and distribution of healthcare products. Your firm has several companies operating in the healthcare sector in its client portfolio.
The MD of Wellbeing has requested that your firm assists with the preparation of the company’s tax computation and provides consultancy services on an ongoing basis in connection with his plans to grow the business.
The MD has also suggested that a partner in your firm joins the board of Wellbeing Co. as a non-executive director.
Required:
a) Identify and explain the threats to independence and objectivity which may arise from the provision of the services requested by the Wellbeing MD, and state how these threats should be resolved.
(8 marks)
b) Describe the matters, other than independence and objectivity, to be considered and the procedures to be performed in order to determine whether it is appropriate for your firm to accept appointment as statutory auditor of Wellbeing Co.
(7 marks)
c) Set out the benefits to audit firms and their clients of having audit and non-audit services provided by the same firm of accountants.
(5 marks)
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