Please enable JavaScript.
Coggle requires JavaScript to display documents.
CH1 SIMS, AUD120258 - Coggle Diagram
CH1 SIMS
AUD120258
A joint venture between the member and the client
All of the above safeguards should be applied.
A cooperative arrangement exists when a member or the member’s firm and an attest client jointly participates in a business activity, which can be a joint venture. However, a cooperative arrangement would not exist when all of the following safeguards are met:
a. The participation of the firm and attest client are governed by separate agreements, arrangements, or understandings that do not create rights or obligations between the firm and attest client.
b. Neither the firm nor the attest client assumes responsibility for the other’s activities or results.
c. Neither party has the authority to act as the other’s representative or agent.
Also, threats to Independence would be at an acceptable level if, during the period of the professional engagement, the cooperative arrangement is not material to the firm or attest client. Thus, all of the given safeguards need to be applied.
The firm has sued the client
All of the above safeguards should be applied.
If there is an actual or even threatened litigation against by either audit client or the firm, the independence is said to be impaired due adverse interest threat. But some of the safeguards that can be considered are:
a. The amounts involved are not material.
b. The matters are not related to the audit services ( billing issues do not generally affect independence)
c. They do not involve matters of trust.
A member is a member of client’s advisory board
The member should not perform any management responsibilities.
The member can be a part of client’s advisory board and would not impose a threat to independence if it is only an advisory role and does not involve any management role. A member on the advisory board will be expected to attend board meetings and provide recommendations and these are not possible safeguards to independence threat. Also, the member having advisory role is not expected to have any voting rights.
Firm is engaged to provide services related to clients’ information systems
Any of the above safeguards can be applied.
Firm being engaged to provide services related to client’s information systems could create a threat to independence. However if such services are either limited to assisting client in setting up the client’s chart of accounts and financial statement format or if it involves designing, then it should be unrelated to client’s financial systems or if it is limited to providing training and instructions to the attest client’s employees on client’s information system, then such services can be performed.
Firm is providing litigation services to the client
The firm should be acting as an expert witness for a large group of plaintiffs or defendants that includes the attest client.
Firm providing litigation services to the client could impair independence. However, the firm providing factual testimony for the client is allowed. Also, if the member was engaged to provide litigation consulting services but subsequently agrees to serve as an expert witness, it will still impair firm’s independence. The firm providing expert witness services are not allowed, but if the firm is acting as an expert witness for a large group of plaintiffs or defendants that includes the attest client, then it would not impair independence.