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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Tandem LLP has audited Oriel Group, a public interest entity, for seven years. The same engagement partner has led the audit throughout and the firm proposes to keep her for the following year as she knows the client well. Under the IESBA Code, what is the key concern?

The main concern is a familiarity threat from long association. For public interest entities the IESBA Code limits the engagement partner's time on the audit, seven years, followed by a cooling-off period. The firm should rotate her off, since her client knowledge does not justify continuing beyond the limit.

  1. AFamiliarity threat arising from long association, which must be addressed, normally by rotating the key audit partner after a set cooling-off period for PIEsCorrect
  2. BSelf-review threat because the partner prepared the financial statements
  3. CAdvocacy threat because the partner promotes Oriel's shares
  4. DIntimidation threat because Oriel has threatened to change auditor

Explanation

Long association with a client creates a familiarity threat. For PIEs the Code sets a time-on limit for the engagement partner (seven years) followed by a cooling-off period, so continuing is not acceptable. The other threats are not indicated by the facts given.

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