Provision of non-assurance services to audit client
Prohibition on assuming mgt responsibilities
Mgt responsibility
- controlling, leading & directing an entity
create self-review (will affect FS subject to audit), self-int (fee dependency, cover up one's own mistake), familiarity, advocacy threat
Ex of actv tht considered mgt responsibility tht require prof judgement:
- setting polices & strategic direction
- hiring / dismissing employees
- directing & taking responsibility for the actions of employees
- authorizing trans
- controlling / managing bank a/c / invst
- deciding which recommendations of the firm / network firm / other 3rd parties
- reporting to those charged with governance on behalf of mgt
- responsible for preparation & fair presentation of FS
- responsible for designing, implementing, monitoring / maintaining internal ctrl
client mgt shld makes all judgements & decisions
Safeguard
- designate an indv who possesses suitable skill, knowledge & experience
- provides oversight of the service & evaluate the adequacy of the results of service performed
- accept responsibility for the actions
Accounting & bookkeeping
Audit clients tht are ❌PIE
Audit clients tht are PIE
Routine / mechanical
- require little / no prof judgement
❌provide to audit client tht the firm will express opinion, unless:
- the services are routine / mechanical nature
- any threats created tht are not an acceptable lvl
Safeguard
- using prof who not audit team members
- appropriate reviewer not involved in non-assurance services review audit work / service performed
❌provide to audit client tht the firm will express opinion, unless:
- the services are routine / mechanical nature for divisions / related entities
- immaterial to FS
- services relates to matters tht are collectively immaterial to FS of division / related entity
Administrative services
- usually ❌create threat
All audit clients
- assisting their routine / mechanical tasks
- require little / no prof judgement
Valuation service
All audit clients
Audit clients tht are PIE
- making assumptions relate to future developments, application of appropriate methodologies & techniques, compute certain value / range of values for an asset, liability / for biz as whole
Factors in evaluating the lvl of such threat
- the extent of client's involvement in determining & approving the valuation & methodology
- degree of subjectivity inherent in the items for valuations
- whether the valuation will have material effect on FS
- the extent & clarity of disclosures related to the valuation
- degree od dependency on future events
Safeguard
- using prof who are not audit team members
- appropriate reviewer not involved in non-assurance service review audit work / service performed
❌provide to audit client if:
- involve significant degree of subjectivity
- material effect on FS
Valuation ❌involve significant degree of subjectivity
- underlying assumption established by law / regulations
- techniques & methodology used are based on generally accpeted stds / prescribed by law / regulations
- results performed by 2 / more parties not likely to be materially different
❌provide to audit client if have material effect on FS tht the firm will express opinion