07/11/2017

07/11/2017

Ethical issues facing auditors – part 3/3

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.

Non-Audit Services

Regularly firms will provide additional services to an audit client (referred to as non-audit services). This can create a number of threats to an auditors independence (self-review, self interest, management, advocacy, familiarity and intimidation threats) Before the firm accepts to provide a non-audit service to the client, the engagement partner should:
  • identify and assess the significance of any related threats to the integrity or objectivity of the firm and covered persons, including whether independence would be compromised
  • identify and assess the effectiveness of the available safeguards to eliminate the threats or reduce them to a level where independence would not be compromised
  • consider whether it is probable that an objective, reasonable and informed third party, having regard to the threats and safeguards, would conclude that that the proposed non-audit / additional service would not impair integrity or objectivity and compromise the independence of the firm or covered persons.
If the auditor determines that an objective, reasonable and informed third party would conclude that the proposed non-audit / additional service would impair integrity or objectivity and compromise the independence of the firm or covered persons, the firm shall either withdraw from the audit or withdraw from the non-audit service. Where threats are identified, there are a number of safeguards that can be put in place to proceed with both engagements. Examples of this include;
  • non-audit work is carried out by staff with no involvement in the audit
  • the work is reviewed by an independent partner or an external reviewer
  • the non-audit work does not include the making of management decisions

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