SECTION A - CASE 1: AQUAPURIFY NGO
AquaPurify NGO is a global charity providing clean water infrastructure in developing nations. You are the audit manager at Grant & Co. The audit for the year ended 31 March 20X6 is being planned. The audit engagement partner, Sarah Jenkins, has been on the engagement for seven years. AquaPurify recently received a massive government grant that requires a separate assurance report. The charity's finance director, a former Grant & Co audit manager who left the firm 18 months ago, has offered the audit team a complimentary luxury safari trip 'as a thank you for their hard work'. Furthermore, Grant & Co has been asked to provide internal audit services to AquaPurify.
Which of the following correctly identifies the ethical threat created by Sarah Jenkins serving as the engagement partner for seven years, and the appropriate safeguard?
ACCA · Question 04 · Audit Framework and Regulation
SECTION A - CASE 1: AQUAPURIFY NGO
AquaPurify NGO is a global charity providing clean water infrastructure in developing nations. You are the audit manager at Grant & Co. The audit for the year ended 31 March 20X6 is being planned. The audit engagement partner, Sarah Jenkins, has been on the engagement for seven years. AquaPurify recently received a massive government grant that requires a separate assurance report. The charity's finance director, a former Grant & Co audit manager who left the firm 18 months ago, has offered the audit team a complimentary luxury safari trip 'as a thank you for their hard work'. Furthermore, Grant & Co has been asked to provide internal audit services to AquaPurify.
What ethical threat is created by the Finance Director being a former audit manager of Grant & Co, and is it acceptable for Grant & Co to continue the audit?
Answer options:
Self-interest threat; the firm must resign immediately.
Familiarity and intimidation threats; it is acceptable to continue as more than 12 months have passed, but safeguards like an independent review should be applied.
Self-review threat; the audit team must not rely on any documents produced by the Finance Director.
No threat is created because the individual left the firm more than 12 months ago.
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