Question 1

CASE SCENARIO: AquaPure Utilities Co
AquaPure Utilities Co is a recently privatized water utility company. You are an audit manager at Blue & Co, responsible for the audit of AquaPure for the year ended 31 December 20X5. AquaPure operates highly specialized water treatment facilities. Management has requested that Blue & Co provide a valuation service for a newly constructed, complex water filtration plant, as AquaPure lacks the internal expertise to value it for inclusion in the financial statements. The filtration plant represents 15% of AquaPure's total assets. Furthermore, during the year, AquaPure was fined by the environmental regulator for a minor chemical spill, which the financial controller has refused to disclose in the financial statements, arguing it is not material by size.

QUESTION:
Which of the following fundamental ethical threats is primarily created if Blue & Co accepts the engagement to value the water filtration plant?

Accepted Answer

Identify the nature of the non-audit service (valuation) and how it impacts the audit. The auditor will have to audit the very valuation they prepared.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Students often confuse self-review with self-interest. While fees generate self-interest, the act of preparing numbers for the financial statements directly causes a self-review threat.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 6

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