Podcast
Questions and Answers
Which of the following is an example of an intimidation threat to a PAPP?
Which of the following is an example of an intimidation threat to a PAPP?
- A firm being threatened with litigation by the client (correct)
- A PAPP feeling pressured to reduce the extent of work performed to reduce fees
- A firm being praised by a client for their excellent work
- A PAPP being encouraged to pursue a new business opportunity
Which of the following is a safeguard to mitigate threats to objectivity created by the profession?
Which of the following is a safeguard to mitigate threats to objectivity created by the profession?
- Audit engagement team meetings
- Client acceptance procedures
- Continuing professional development requirements (correct)
- Firm-wide quality control policies
What is a potential consequence of a PAPP not establishing safeguards to mitigate intimidation threats?
What is a potential consequence of a PAPP not establishing safeguards to mitigate intimidation threats?
- Loss of audit engagement
- Damage to professional reputation
- Compromised objectivity (correct)
- All of the above
Which of the following is a characteristic of a safeguard in the work environment?
Which of the following is a characteristic of a safeguard in the work environment?
What is the primary purpose of professional standards?
What is the primary purpose of professional standards?
Which of the following is an example of a safeguard created by legislation or regulation?
Which of the following is an example of a safeguard created by legislation or regulation?
What is the primary objective of external review by a legally empowered third party?
What is the primary objective of external review by a legally empowered third party?
Which of the following is a characteristic of intimidation threats?
Which of the following is a characteristic of intimidation threats?
What is the primary purpose of professional or regulatory monitoring and disciplinary procedures?
What is the primary purpose of professional or regulatory monitoring and disciplinary procedures?
Which of the following is a potential consequence of a PAPP not establishing safeguards to mitigate threats to objectivity?
Which of the following is a potential consequence of a PAPP not establishing safeguards to mitigate threats to objectivity?
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Study Notes
Work Environment Safeguards
- Firm-wide safeguards in the workplace environment include:
- Leadership stressing importance of compliance with fundamental principles
- Policies and procedures to implement and monitor quality control of engagements
- Documented policies regarding identification of threats to compliance
- Policies and procedures to monitor and manage reliance on revenue from a single client
- Using different partners and engagement teams for non-assurance services to assure clients
- Policies to prohibit inappropriate influence on engagement outcome
- Timely communication of policies and procedures to all partners and professional staff
- Designating a member of senior management to oversee quality control system
- Advising partners and professional staff of assurance clients and related entities
- Disciplinary mechanism to promote compliance
- Published policies to encourage and empower staff to communicate compliance concerns
- Engagement-specific safeguards in the work environment include:
- Having a PAPP review non-assurance work or advise as necessary
- Having a PAPP review assurance work or advise as necessary
- Consulting an independent third party, such as a committee of independent directors
- Discussing ethical issues with those charged with governance of the client
- Disclosing nature of services provided and extent of fees charged to governance
- Involving another firm to perform or re-perform part of the engagement
- Rotating senior assurance team personnel
The Qualities of an Auditor
- The nine qualities that should characterize an auditor:
- Accountability
- Integrity
- Objectivity and Independence
- Competence
- Rigour
- Judgement
- Clear, complete, and effective communication
- Association
- Providing Value
Multiple Choice Questions
- Elements of an assurance engagement:
- A three-party relationship
- Suitable criteria
Intimidation Threats
- Circumstances that create intimidation threats for a PAPP:
- Firm being threatened with dismissal from a client engagement
- Audit client indicating that it will not award a non-assurance contract to the firm
- Firm being threatened with litigation by the client
- Firm being pressured to reduce inappropriately the extent of work performed
- PAPP feeling pressured to agree with client employee due to expertise
- PAPP being informed that a planned promotion will not occur unless agreeing with an audit client's inappropriate accounting treatment
Safeguards to Mitigate Threats to Objectivity
- Safeguards to eliminate or reduce threats to an acceptable level:
- Safeguards created by the profession, legislation, or regulation
- Safeguards in the work environment
- Safeguards created by the profession, legislation, or regulation:
- Educational, training, and experience requirements for entry into the profession
- Continuing professional development requirements
- Corporate governance regulations
- Professional standards
- Professional or regulatory monitoring and disciplinary procedures
- External review by a legally empowered third party of the reports, returns, communications or information produced by a professional accountant
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