ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
While completing the audit of Teal plc, a listed entity, the engagement partner identifies that the audit team included a manager whose spouse recently bought shares in Teal plc. The threat was addressed by removing the manager. Under ISA 260 (Revised), which communication to TCWG is required regarding independence?
The auditor must tell those charged with governance that the team and firm have complied with independence requirements, and disclose relationships that may bear on independence along with safeguards applied. Here that includes the share purchase and the removal of the manager.
- AA statement that the engagement team and firm have complied with relevant ethical requirements on independence, plus relationships and safeguards appliedCorrect
- BNo communication, as removing the manager eliminated the matter
- COnly a verbal note to the finance director, not TCWG
- DA list of all firm clients in which staff hold shares
Explanation
For listed entities ISA 260 requires the auditor to communicate a statement that the team and firm have complied with relevant ethical requirements regarding independence, and matters that may reasonably bear on independence, including related safeguards. Silence is wrong because the threat and the action taken are exactly the kind of matter to be communicated. Communicating only to management is also wrong as the audience is TCWG.
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