ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability
Hartwell & Partners is a partnership auditing a listed client and is concerned that a negligence claim could threaten partners' personal assets. Which structural step would best address this concern?
Converting the firm into a limited liability partnership or company, where local law allows, protects partners' personal assets from firm-level claims. Reports, representation letters or client selection do not change the legal structure that determines personal exposure.
- AConverting to a limited liability partnership or limited company, where local law permitsCorrect
- BAdding a going concern paragraph to client reports
- CRequiring clients to sign larger representation letters
- DAccepting only clients with no external shareholders
Explanation
Operating through a limited liability vehicle ring-fences partners' personal assets from firm liabilities, subject to local law, though the partners can remain liable for their own negligence. The other options do not change the firm's legal structure or the personal exposure of partners.
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