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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit-related and assurance services

Marlow Assurance is engaged to examine a client's greenhouse gas statement. The statement is prepared by the client's management, and the practitioner also prepared the calculation model used, and will report a conclusion on the statement. Considering the nature of the engagement, which is the most significant issue under the IESBA Code?

The main issue is a self-review threat. By building the calculation model and then providing assurance on its output, the practitioner would evaluate its own work. The IESBA Code applies to all assurance engagements, so the firm must assess safeguards or decline the engagement.

  1. AA self-review threat to independence, as the practitioner would be assessing its own workCorrect
  2. BAn advocacy threat because the practitioner reports to lenders
  3. CAn intimidation threat because management prepared the statement
  4. DNo threat, because assurance on non-financial information is outside the Code

Explanation

Preparing the calculation model and then giving assurance on the output means evaluating its own work, a self-review threat. The Code applies to assurance engagements of all types, so the last option is wrong. Nothing in the facts suggests advocacy or intimidation. The firm must assess whether safeguards can reduce the threat, otherwise decline.

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