Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Brightmoor Plc's auditor, Tanner & Co, has audited the company for six years. The finance director has asked Tanner & Co to also design and implement the company's new accounting system and to prepare the year-end financial statements. Which is the best description of the position?

Preparing the accounts and designing the accounting system would create a self-review threat, because the auditor would be auditing its own work. The firm should decline, or apply safeguards that remove the threat. The relative fee size does not cure it.

  1. AThis creates a self-review threat to independence, and the firm should decline or have safeguards that remove the threatCorrect
  2. BThis is acceptable provided the fee for the extra work is lower than the audit fee
  3. CThis creates no threat because the work is done for the finance director rather than the members

Explanation

Preparing the financial statements and designing the systems the auditor later audits means the auditor reviews its own work, a self-review threat. Fee size does not remove this threat, so the second option is wrong. Who requests the work is irrelevant, so the third is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Other company officers shows your real accuracy, how long you take and where you lose marks.

Practise Other company officersFree diagnostic mock

More Other company officers questions