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

Halcyon & Partners audits Delta Ltd. A tax partner at Halcyon is also asked to advise Delta's managing director personally on a dispute with his spouse over ownership of Delta shares. Halcyon considers both engagements, and the managing director says the audit team must not know of the advice. Which statement is most accurate?

The firm must evaluate the conflict and the threats it creates, consider safeguards and disclosure to affected parties, and decline or withdraw from one engagement if the threats cannot be reduced to an acceptable level. A request for secrecy from the managing director cannot override these obligations, nor do separate teams always suffice.

1. AConfidentiality towards the managing director prevents the firm from considering the conflict at all
2. BThe conflict is eliminated because the engagements are with different legal persons
3. CDisclosure to Delta's audit committee is required regardless of the managing director's consent, but separate teams alone always eliminate the threat
4. DThe firm must evaluate the threats, may need to disclose to affected parties, and if safeguards cannot reduce threats to an acceptable level must decline one engagementCorrect