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Employment with an audit client, Long association of personnel (include…
Employment with an audit client
All audit clients
Former partner / audit team member restrictions
:red_cross:significant connection remain btwn the firm / network firm & the indv, unless:
the indv :red_cross:entitled to benefits / payments from the firm / network firm
amt owed to the indv is immaterial to the firm / network firm
the indv :red_cross:continue participate in the firm's / network firm's biz / prof actv
Audit team members entering employment with a client
firm / network firm shall have policies & procedures tht require to notify the firm / network firm
self-int threat
remove the indv from audit team
Familiarity / intimidation threat arise when audit team member / partner of the firm / network firm:
director / officer of audit client
employee in position to exert significant influence over the preparation of a/c records / FS (
senior employee
)
Factors in evaluating the lvl of such threat
position of the indv held with client
involvement of the indv with audit team
length of the since the indv was audit team member / partner of the firm / network firm
former position of indv within audit team firm / network firm
Safeguard
modify audit plan
assign sufficient experience audit team indv
appropriate reviewer review work perform by former audit team member
Audit clients tht are PIE
unless:
audit client issued audited FS covering a period of :red_cross:<12 mths (cooling period)
indv was :red_cross:audit team member
Long association of personnel (include partner rotation) with audit client
All audit clients
Audit clients tht are PIE
:red_cross:audit >7 cumulative yrs
after 7 yrs, serve cooling-off period
Time-on period (7 yrs)
the count of yrs :red_cross:restarted unless the indv ceases to act any of one roles for a min period
eg.
served 4 yrs, off 3 yrs, can act as key audit partner on same audit engagement for further 3 yrs (4+3)
rare case, outside firm's ctrl (eg. serious illness of intended engagement partner), permitted to serve an additional yr as long as threat to independence can be eliminated . reduced to acceptable lvl (7+1)
if becomes PIE, include the length of time served b4 become PIE
if served >=6 yrs b4 become PIE, continue serve a max of 2 additional yrs
exemption
, firm has few people with necessary knowledge & experience to audit PIE, can serve >7 yrs & :red_cross:regular independent external review
concern abt losing a longstanding client / int in maintaining close personal relationship
Factors in evaluating the lvl of such threats
In relation to indv
overall length of indv's relationship with client
period of the indv has been an engagement team & nature of roles performed
the extent of work of indv is directed, reviewed, supervised by more senior personnel
indv's ability to influence the outcome of audit
closeness of indv's personal relationship with senior mgt / those charged with governance
nature, frequency & extent of interaction btwn indv & senior mgt / those charged with governance
In relation to audit client
nature / complexity of the client's a/c FR issues
any recent change in senior mgt / those charged with governance
any structural change in client's organization which impact the nature, frequency & extent of interaction
Safeguard
departure of tht member of client's senior mgt
rotating the indv off the audit team
change the role of indv on audit team
appropriate reviewer not audit team member review work of the indv
perform regular independent internal / external quality review of engagement
Cooing-off period
normally 5 consecutive yrs
if responsible for engagement QC review, cooling-off period is 2 consecutive yrs
if served key audit partners for 7 consecutive yrs, cooling-off period is 2 consecutive yrs
Restriction on actv
during cooling-off period :red_cross::
be engagement team partner / provide ACfor audit engagement
consult with engagement team / client regarding technical / industry-specific issues, transactions / events
be responsible for leading / coordinating prof services provided by the firm / network firm
Temporary personnel assignments (secondment)
Safeguard
conduct additional review of work performed by loaned personnel , might create self-review threat
:red_cross:include the loaned personnel as audit team member, might create familiarity / advocacy threat
:red_cross:giving the loaned personnel audit responsibility for any function / actv tht the personnel performed during secondment, might create self-int threat
:red_cross:loaned personnel to audit client, unless:
provided for short period of time
the personnel :red_cross:involve in providing non-assurance services
:red_cross:mgt responsibilities for the personnel, the audit client is responsible for directing supervising the actv of the personnel