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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Brindle LLP audits Corvo plc. Corvo's finance team is short-staffed, and Brindle's audit manager is asked to prepare the draft depreciation and lease calculations that will feed the financial statements, with Corvo's management only approving the final figures. Brindle's staff who prepare these figures are not part of the audit team, and Corvo is not a public interest entity. Which approach is most consistent with the IESBA Code?

For a non-public-interest audit client, the firm may prepare accounting figures only after evaluating the self-review threat and applying safeguards, such as using staff outside the audit team and management accepting responsibility. It is neither automatically permitted nor automatically prohibited.

  1. AEvaluate the self-review threat and provide the service only if safeguards reduce the threat to an acceptable level, ensuring management takes responsibilityCorrect
  2. BProvide the service because staff outside the audit team are used, which removes every threat
  3. CRefuse automatically, as preparing any accounting records is prohibited for all audit clients
  4. DProvide the service and disclose it only in the engagement letter

Explanation

For non-PIE audit clients, preparing accounting records is permitted if the self-review threat is at an acceptable level or can be reduced to one, for example by using staff outside the audit team and management taking responsibility. Using separate staff is a safeguard, not a guarantee. An automatic ban applies to public interest entities in most circumstances, not to this case, and disclosure in the engagement letter alone is not a safeguard.

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