Ethical issues facing auditors – part 1/3

The Ethical Standard for Auditors, issued by the Irish Auditing & Accounting Supervisory Authority set out the basic principles that must be applied when carrying out an audit. All audit firms must comply with this standard. The standard also addresses certain circumstances where an auditor may be faced with an issue that challenges their ability to act independently. Where possible, the standard seeks to advise audit firms on circumstances that are prohibited and also circumstances that are only allowed after adequate safeguards have been put in place.

Loan staff assignments

Occasionally, an audit firm may provide an employee to work for the audit client temporarily (as if the employee were employed by the audit client). This may give rise to many ethical threats (including objectivity, independence, management and self-review threats) when the time comes to carry out the year-end audit. Assignments like this should only be entered into if the audit client agrees that;
  1. The employee will not hold a management position in the client.
  2. The audit client directs and supervises the work performed by the employee and this work does not include;
    • Making management decisions.
    • Exercising discretionary authority to commit the audit client to a particular position or accounting treatment.
On completion of the assignment, the returning staff member should not be given any role on the audit involving any function or activity that he or she performed or supervised during that assignment. Depending on the nature of the assignment, it may also be necessary to apply this restriction for a number of years.

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