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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

In the audit of Harbourline Shipping, listed, the engagement partner concludes the audit team complied with independence requirements, but a non-audit service provided by the network firm created a self-review threat that was reduced by safeguards. Which communication does ISA 260 require regarding independence for a listed entity?

For a listed entity, the auditor must confirm compliance with independence requirements and communicate relationships and other matters that may reasonably bear on independence, together with safeguards applied to eliminate or reduce threats. A fee ratio statement alone, or silence, would not satisfy ISA 260.

  1. AA statement that the firm complies with relevant independence requirements, plus relationships and other matters that may reasonably bear on independence and related safeguards appliedCorrect
  2. BOnly a statement that the audit fee is below 15% of the firm's total income
  3. CNo communication is needed because independence is judged solely by the firm
  4. DA list of all clients of the network firm worldwide

Explanation

For listed entities, ISA 260 requires the auditor to state that the team and firm comply with relevant ethical requirements on independence and to communicate relationships and other matters that may reasonably be thought to bear on independence, plus safeguards applied. A fee percentage alone is inadequate, and listing all network clients is not required.

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