Module 11 Auditor Independence and Ethics

Question 1

What is ICAS’s code of ethics?

Answer 1

• Confidentiality
• Objectivity
• Professional competence and due care
• Integrity
• Professional Behaviour

Question 2

What is independence?

Answer 2

Freedom from conditions and relationships which make it probable that a reasonable and informed third party would conclude that integrity or objectivity either is or could be impaired

1. The fact of independence
2. The appearance of independence

Question 3

What are the six threats which may affect independence? MASSIF

Answer 3

• Management
• Advocacy
• Self-interest
• Self-review
• Intimidation
• Familiarity

Question 4

What is the SOX vs UK listed conflict of interest rule?

Answer 4

• CEO, CFO or CAO were employed by the accounting firm and participated in any capacity in the audit of the company during the year preceding the date of the initiation of the audit
• not allowable for any partner on an engagement to join the client in a key management position within 1 year

Question 5

Auditors of listed or public interest entities (‘PIEs’) are also required to ensure the audit committee is provided with

Answer 5

• A written disclosure of relationships that may bear on the integrity, objectivity or independence of the firm
• Details of non-audit services, including the fees charged
• Written confirmation that the firm and each covered person is independent
• Details of any inconsistencies between the Ethical Standard and the policy of the entity for the provision of non-audit services
• Details of any breaches of the requirements in the Ethical Standard and of any safeguards applied or actions taken to address any threats to independence
• An opportunity to discuss independence issues

Question 6

SOX prohibits accounting firms from providing specific additional non-audit services to audit clients.

Answer 6

• Book-keeping
• Financial information systems design and implementation
• Internal audit and valuation advice

Question 7

Audit partner rotation SOX vs UK listed?

Answer 7

• SOX audit partner should be rotated after acting for a period of five years.
• UK Engagement partners should rotate after a period of five years
• UK independent review partner should be rotated after seven years