ExpertACCA · Question 03 · Audit framework and regulation
CASE 1: NEXUSCLOUD LTD
NexusCloud Ltd is a rapidly growing SaaS (Software as a Service) technology startup. You are an audit manager at TechAudit LLP. NexusCloud is preparing for an IPO and has requested TechAudit to provide both the statutory audit and IT system design services for their new revenue recognition platform. The audit committee currently consists of the CEO, the CFO, and one independent non-executive director. The engagement partner has just rotated onto the audit after the previous partner served for 7 years.
Regarding the rotation of the engagement partner, which of the following statements is true according to ethical standards for Public Interest Entities?
CASE 1: NEXUSCLOUD LTD
NexusCloud Ltd is a rapidly growing SaaS (Software as a Service) technology startup. You are an audit manager at TechAudit LLP. NexusCloud is preparing for an IPO and has requested TechAudit to provide both the statutory audit and IT system design services for their new revenue recognition platform. The audit committee currently consists of the CEO, the CFO, and one independent non-executive director. The engagement partner has just rotated onto the audit after the previous partner served for 7 years.
Regarding the rotation of the engagement partner, which of the following statements is true according to ethical standards for Public Interest Entities?
Answer options:
The previous partner should have rotated after 5 years; 7 years is a breach of ethical standards for PIEs.
The rotation after 7 years is in line with ethical requirements to mitigate the familiarity threat for PIEs.
Partner rotation is only recommended, not mandatory, provided an Engagement Quality Control Review is performed.
The previous partner can return to the engagement after a cooling-off period of 1 year.
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