ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Meridian & Co audits Zenith plc, a PIE. During the year, Meridian's tax team proposes to provide Zenith with tax advice on a transaction where the advice would be based on an aggressive interpretation, and the outcome would have a material effect on the financial statements. The tax team also suggests a separate valuation of a significant intangible that will be material to the financial statements. Which conclusion is most consistent with the IESBA Code?

Both services should be refused. For a PIE audit client, the IESBA Code prohibits valuation services and certain tax advice that would have a material effect on the financial statements, because the resulting self-review threat cannot be reduced to an acceptable level by separate teams or management responsibility.

1. ABoth services are permitted provided separate teams carry out the work and management takes responsibility
2. BBoth services are prohibited for a PIE audit client where they would have a material effect on the financial statements, and a self-review threat arises that cannot be addressedCorrect
3. CThe valuation is permitted but the tax advice is prohibited, because valuation never creates a self-review threat
4. DThe tax advice is permitted, but the valuation is prohibited only where it is carried out by the audit engagement partner personally