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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reports to those charged with governance and management

During the audit of Zenith Foods Ltd, a listed company, the audit engagement partner of Marlow & Co is preparing communications to those charged with governance (TCWG) under ISA 260 (Revised). Which of the following must the auditor communicate regarding independence for the audit of a listed entity?

For a listed entity the auditor must tell TCWG that the engagement team and firm have complied with relevant ethical requirements on independence, along with matters that may reasonably bear on independence and the safeguards applied. Independence remains the auditor's responsibility, so fees alone or management approval would not satisfy ISA 260.

  1. AA statement that the engagement team and the firm have complied with relevant ethical requirements regarding independenceCorrect
  2. BOnly the fees charged for the audit, with no reference to other services
  3. CA statement that independence is the sole responsibility of the audit committee
  4. DA confirmation that the client management has approved the firm's independence policies

Explanation

For listed entities, ISA 260 (Revised) requires the auditor to communicate a statement that the engagement team, the firm and network firms have complied with relevant ethical requirements on independence. It also covers relationships and other matters that may reasonably bear on independence, and related safeguards. Limiting the communication to fees is incomplete, and independence is the auditor's responsibility, not the audit committee's.

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