Vous êtes sur la page 1sur 3

Section 1: Legal and other professional regulations,

ethics and current issues

1. Ethical issues and procedures (15
The second opinion may compromise the opinion of the existing
Client may be opinion shopping which may indicate lack of
management integrity
May be a threat to professional competence and due care if firm is
not in possession of all the facts
Audit firm may be tempted to give the opinion the client desires in
order to obtain future work (Self-interest threat)
Obtaining clients permission to contact the existing auditor and
notifying auditor of the work to be undertaken so that your firm is in
full possession of all the facts
If client refuses permission must normally decline to act
2. Safeguards re fees
To recognise threat: Regularly review situation as client profile changes
To offset threat:
The fact needs to be disclosed to the ethics partner and those
charged with governance at the client and adopt appropriate
safeguards where necessary. For non-listed clients an external hot
review needs to be undertaken.
If total fees regularly exceed 15% of annual fee income (or 10% for
listed company) do not accept the assignment
3. Overdue fees
4. Actions
Report to Money Laundering Reporting Officer (MLRO) within the
firm, which fulfils their responsibility
Report to National Crime Agency (NCA)
Avoid tipping off the client
So as not to prejudice legal proceedings
Recommend repayment to customers
Ensure included as liability not income
Reasons: Representing proceeds of crime or theft; criminal offence if
auditor does not report
26.Audit firms are required, by ES3, to establish procedures and policies to
monitor the length of time that audit engagement partners serve as a long
association with the audit engagement may create threats to auditors
objectivity and independence resulting from: self-interest, self-review and
An engagement partner or other key people should be moved off the job
when they have been involved with an audit engagement for:
10 years for non-listed clients
5 years for listed clients (It may be extended if the clients audit
committee considers that this is necessary to safeguard the quality
of the audit)
A firm need to:

Apply safeguards to reduce any threats to an acceptable level

Resign from the audit if appropriate safeguards cant be applied.
By ES5, valuation services should not be provided for a listed
company where the valuation would have a material effect on the
financial statements (greater than 2% of total assets).
Self-review threat is too great so that no adequate safeguards can
be applied.
May rely too heavily on valuations in subsequent audit
May be reluctant to identify a misstatement in the valuation
Management threat as may involve subjective judgement/making

Section 2: Accepting and managing engagements

1. Professional enquiry (Relevant matters included in letter from prospective
auditor to existing auditor)
Unlawful acts and defaults by the client
Serious doubts re clients integrity
Differences of opinion between the auditor and the client
Information required by auditor being deliberately withheld by client
Clients reasons for change not in accordance with the facts
Important differences of principle or practice behind the proposed
A statement of circumstances to be brought to attention of
2. Rights on removal
Receive notice, attend, speak and hear at the meeting where they
would have been appointed, or the proposed new auditor is
To have a written representation notified to all members to explain
why they should not be removed as auditors
3. Accepting appointment as auditors
Matters to consider
Whether the going concern issue likely to be present for future
accounting periods
Whether the going concern disclosures made were warranted
Whether Meldrew will give permission to contact existing auditors
Whether current auditors agree with reason given by Meldrew for
not wishing to reappoint
Is your firm independent from Meldrew to be able to carry out
objective audit?
Nature of Meldrews business
Timing/resource requirements to be able to perform audit
Procedures to follow

Discuss with directors current going concern status

Review PY account to see whether going concern disclosures were

necessary and to ascertain amount of work likely to be necessary
Request permission to contact current auditors If refused, decline
the appointment
Write to current auditors enquiring if any matters that affect
appointment of your firm as auditors If no response, consider
refusing appointment
Compare estimated time required with current resources to
ascertain whether sufficient staff available at required times
Compare estimated level of fee income with current recurring fee
income to ascertain whether ethical limits likely to be breached
4. Reasons for review
Consider whether work done is in line with strategy
Confirm the work has been performed in accordance with
professional standards and regulatory and legal requirements
Confirm all significant matters have been raised for further
Assurance work carries duty of care to client
Audit work carries duty of care to third parties/protection against
Audit is regulated activity and governed by ISAs