Laila, a chartered accountant, has been asked by an audit client to undertake an engagement involving implementing an IT information and control system. The client requested that, in setting up the new system and during the period prior to conversion to the new system,
Laila
• Counsel on potential expansion of business activity plans
• Search for and interview new personnel
• Supply the computer hardwares for the system upgrade
• Train personnel
• Determining what type of control should be integrated in the new system
In addition, the client request that, during the three months subsequent to the conversion, Laila
• Report, on behalf of the management to the board of director on the effectiveness of the new system.
• Monitor the client-prepared source documents and make changes in basic IT-generated data as Laila may deem necessary without concurrence of the client.
• Make recommendation for changes deem necessary for the effectiveness and efficiency of the system.
Laila responds that she may perform some of the services requested but not all of them since it could lead to the violation of MIA By-Law.
REQUIRED:
a. State FOUR (5) of these services that should not be performed by Laila and explain its related threat to independence.
b. Discuss whether Laila could accept the engagement related to the system development if she is not qualified to develop the system all by herself.
c. Discuss whether you feel auditor should be allowed to provide non audit services to their audit client.
In my point of view,auditor should be allowed to provide non audit services to audit client only if there are no conflicts with independence and objectivity. They should be able to choose the provider they believe will do the best job otherwise their oversight accountability and responsibility will be undermined, competition reduced and the costs and complexity to both companies and, in the end, consumers and investors could increase. Unnecessary prohibitions or limitations may deprive the company of the very best skills when it needs them most. This is important because as business models, technology and accounting standards change, the auditor's skills and their service offerings must change to reflect the evolving market. I think that auditor should be allowed to provide non audit services to their audit client if the non-audit services are insignificant threat to the professional independence, integrity and objectivity of the member or his firm.