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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reporting on other assignments

Tarn Advisory is asked to review Veritas Ltd's financial statements under ISRE 2400 (Revised). The firm's partner had been the company's external auditor until last year and the same team will perform the review. Which statement is correct?

The engagement may be accepted only if the practitioner meets relevant ethical requirements including independence and has the competence and capabilities to perform it. Prior service as auditor is not a bar, but independence is required for review engagements, and contingent fees would be improper.

  1. AThe firm cannot accept because a former auditor is never permitted to perform a review
  2. BThe engagement can be accepted only if the practitioner complies with relevant ethical requirements, including independence, and the engagement team is not deemed lacking in competenceCorrect
  3. CThe firm may accept without independence considerations because limited assurance is lower than audit assurance
  4. DThe engagement is acceptable provided the review fee is contingent on the conclusion given

Explanation

ISRE 2400 requires the practitioner to comply with relevant ethical requirements, including independence, which apply to review engagements because they are assurance engagements. Prior audit work does not automatically bar acceptance. Independence is not relaxed for limited assurance, and a fee contingent on the conclusion would create a self-interest threat that is unacceptable.

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