The objectivity of external auditors may be threatened or appear to be threatened in the following circumstances:
business
Description
ETHICS
The objectivity of external
auditors may be threatened or appear to be threatened in the following
circumstances:
a)
The audit firm is heavily financially dependent on one
significant client;
b)
The audit firm, its partners or staff have a financial
interest in the audit client;
c)
There are family relationships between the firm, its
partners, staff and the audit client;
d)
The audit firm provides non-audit services to the audit
client;
e)
The audit firm has been the external auditor of the
client for the past 10 years.
Requirement:
1)
Define independence and objectivity
as they apply to an auditor.............(10
Marks)
2)
Discuss the importance of
auditor independence in the auditor-client relationship ………........................................................................................................(10 Marks)
3)
For each of the five
circumstances (a) - (e) above, explain the type of threat it creates and analyse
the possible consequences of such threats to the conduct and outcome of the
audit…..................................................................................................(50 Marks)
4)
Recommend the steps to be taken
by the audit firm to reduce the threat to the auditors objectivity for each of
the above circumstances (a) - (d).............................(15 Marks)
Appropriate and
professional presentation of assignment……………………………(5 Marks)
o Signed assignment submission sheet
o Word document, Times New Roman, Font size 12, 1.5 line spacing
o Contents page
o Introduction
o Main body (Answers to 1), 2) & 3))
o Conclusion
o List of references
o
Headers/ footers/ page numbers
Appropriate presentation of assignment correctly
referenced using the Harvard Referencing System……………………………………………………………………………...(10 Marks)
(Total 100 Marks)
