Question 1.
For each of the following safeguards, identify whether they are:
- safeguards created by the profession, by legislation or by regulation
- safeguards developed by the firm
- safeguards which are engagement specific
- safeguards within the client's systems
1. disclosure of fees
2. competence of employees
3. using different partners and teams with separate reporting lines for the provision of non-assurance services to an assurance client
4. professional standards and pronouncements
5. timely communication of policies and procedures to all partners and professional staff
6. internal procedures to ensure objective decisions on engagements
7. professional review by other professional accountants
8. involving another firm to perform or re-perform part of the engagement
9. corporate or other governance regulations
10. firm leadership which emphasises compliance and ethics
Question 2.
Classify each of the following threats as either; self-interest, self-review, advocacy, familiarity or intimidation.
1 The CEO threatens to change auditors unless an unqualified opinion is issued
2 Each member of the audit team received a holiday cruise as a gift from the client
3 The audit partner owns a significant amount of shares in the client company
4 The audit partner is the brother-in-law of the client company's director
5 The audit firm is promoting a new issue of shares from the client company
6 The audit firm is acting as an advocate on behalf of the client in a dispute with a third party
7 Management is pressuring the firm to reduce its audit hours in order to reduce the fees
8 The audit partner has been approached about becoming a board member with the client company next year
9 A member of the audit team was recently a director of the client company
10 The audit must cover an inventory valuation system which was implemented by the audit firm after last year's audit