Auditing and Assurance

Running head: AUDITING AND ASSURANCE
Auditing and assurance
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1AUDITING AND ASSURANCE
Table of Contents
Answer to question 1 and 2.............................................................................................................2
Reference.........................................................................................................................................5

2AUDITING AND ASSURANCE
Answer to question 1 and 2
Answer Threats Safeguards Assessment of objectives
(a) Self interest threat –
as the close family
member of that is
wife of Andrew
who is the partner-
in-charge for SCA,
the auditor, for
providing non-audit
services
In accordance with Para 290.105
of APES 110, if any close family
member of the member of audit
team has direct financial interest
or material indirect financial
interest in audit client, it will
create self-interest threat.
Safeguards those can be applied
in this situation are –
1.Disposing of the financial
interest immediately by the close
family member
2.Reviewing the work of audit
team member
3. Removing the particular
individual from audit team
(Martinov-Bennie and
Mladenovic 2015).
Given the relationship of
husband – wife between
Andrew and Michelle and
planning of purchasing
shares by Michelle are in
significant numbers, the
threat will be considered as
material. Independence in
this situation can be
achieved through –
1.Not purchasing the shares
in Andrew’s client company
2. work of Andrew shall be
reviewed by another
member
3. Andrew shall be removed
from the audit team
(Martinov-Bennie and
Mladenovic 2015).
(b) Self interest threat –
as the auditor
receiving
significant fees
from one particular
client for 2
consecutive years
In accordance with Para 290.222
if the audit team is receiving
significant fees that is more than
15% of total fees from all the
client from one particular client
for 2 consecutive years it creates
self interest threat. Safeguards
those can be applied in this case
are –
1.prior to issuance of 2nd year’s
financial statement any member
from outside the firm shall
express opinion on financial
statement through performing
the Engagement quality control
review of the engagement or any
professional regulatory body
as SCA receiving significant
fees from DML that is more
around 20% of total fees
from all the client from one
particular client for 2
consecutive years the threat
is significant. Independence
in this situation can be
achieved through –
1.review of 2nd years
financial statement by any
member from outside the
firm through performing the
Engagement quality control
review of the engagement or
by any professional
regulatory body