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CA Final · Advanced Auditing, Assurance and Professional Ethics · Sustainable Development Goals (SDG) & Environment, Social and Governance (ESG) Assurance

CA Karan, a partner in a firm, is asked to provide assurance on the sustainability report of Nirmal Foods Ltd. The same firm's consulting team designed the company's carbon-accounting system and still operates it, preparing the emission figures. What is the correct conclusion under the Code of Ethics?

A self-review threat exists because the firm's consulting team prepares the emission figures that it would then assure. Safeguards such as a different signing partner or fee disclosure are inadequate, so the firm should generally decline the assurance engagement.

  1. ANo threat exists, since consulting and assurance are separate service lines
  2. BThe threat is acceptable if a different partner signs the report
  3. CA self-review threat arises; as the firm effectively prepares the subject matter, it should not accept the engagement unless safeguards can reduce the threat to an acceptable level, which is unlikely hereCorrect
  4. DThe engagement is permitted if the fee is disclosed in the report

Explanation

Operating the system that produces the figures means the firm would review its own work, a self-review threat. Using a different signing partner or disclosing the fee does not eliminate it. Safeguards are unlikely to suffice when the firm itself prepares the data.

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