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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Harbour & Co, an audit firm, is invited to tender for the audit of Zenith Ltd. Before submitting the tender, the partner wants to confirm the firm can accept the engagement under the IESBA Code. Which action is most appropriate at this stage?

The firm should assess, before tendering or accepting, whether threats to the fundamental principles including independence exist and can be reduced to an acceptable level. Independence checks cannot be postponed until after appointment, and responsibility for them cannot be passed to the outgoing auditor.

  1. AAssess whether threats to compliance with the fundamental principles, including independence, exist and can be reduced to an acceptable levelCorrect
  2. BSubmit the tender first and consider independence only after the appointment is confirmed
  3. CRely on the outgoing auditor to confirm that Harbour & Co is independent
  4. DDelay all ethical checks until the first audit planning meeting

Explanation

Before accepting an appointment, a firm must consider whether acceptance would create threats to the fundamental principles, such as independence, and whether safeguards can reduce them to an acceptable level. Leaving checks until after appointment is too late, and the outgoing auditor cannot assess the new firm's independence.

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