ACCA Strategic Professional · Advanced Audit and Assurance (International) · International regulatory frameworks for audit and assurance services
Kestrel & Partners has audited Lumo plc, a listed entity, for eight years. The audit engagement partner has led the audit throughout. Country R's law, based on a regulatory framework for public interest entities, restricts partner tenure. Which response is most consistent with the IESBA Code's approach to long association?
The Code treats long association of senior personnel as a familiarity and self-interest threat. The firm should evaluate the threat and apply safeguards, including rotating the key audit partner after the prescribed period for public interest entity audits, not merely disclose tenure or ignore it.
- ANo action is needed because tenure is only a concern for the firm, not individuals
- BConsider the threats from familiarity and self-interest and apply safeguards, with rotation of the key audit partner after the specified period for public interest entitiesCorrect
- CReplace the audit firm immediately regardless of any threat assessment
- DDisclose the tenure in the audit report and continue with the same partner
Explanation
The IESBA Code identifies long association as creating familiarity and self-interest threats and requires safeguards, including rotation of the key audit partner after a set period for PIE audits. Disclosure alone does not remove the threat, and replacing the firm is not required by the Code.
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