7) CPC - Part 3 Flashcards
how to identify conflicts of interest ito P3?
- identify potential conflicts pre-acceptance of new client
- identify cause of the conflict and remain alert to changes over time
how to evaluate conflicts of interest ito P3?
- more direct the connection between matter and interest = less acceptable level
- evaluate measures which prevent unauth disclosure of confidential info
how to address conflicts of interest ito P3?
- withdraw from engagement if consent is refused
- safeguards = separate engagement teams to maintain confidentiality, reviewer to review conclusions
- disclose and obtain consent from affected parties in writing
what should be done ito disclosure for conflicts of interest ito P3?
remain alert to confidentiality
what should be done if consent cannot be obtained for conflicts of interest ito P3?
the firm can only continue the relationship if:
- the firm is not in opposing roles in their relationship with each client
- measures in place to prevent disclosure
- RITP would be likely to conclude that it is appropriate to continue
what should be documented for breaches of conf for conflicts of interest ito P3?
- nature
- measures to prevent disclosure
- why it is appropriate to continue
what does professional appointments regard?
acceptance of a new audit client and sketchy activities the potential client is doing
what are safeguards to address self-interest in professional appointments?
- assigning sufficient engagement personnel with necessary competencies
- realistic timeframe for performing engagement
- use experts
what are some safeguards for changes in professional appointment?
- get info from previous accountant (or other reasonable steps if not available)
- background investigations / info from 3P
what must be done if the potential client does not give permission for proposed PA to communicate with existing PA?
decline the appointment, unless (exceptional circumstances), proposed PA has full knowledge and is satisfied with facts
what are the requirements for the previous PA?
when asked to respond to proposed PA, comply with laws (confidentiality) and provide info honestly
how shall the proposed PA treat info gathered from the previous PA?
with the strictest confidence
what are the requirements for changes in audit / review appointments?
get relevant info from previous auditor
when should the PA use an expert for professional appointments?
if use is warranted
what threat can occur if audit fees offered are too low?
- professional competence and due care
- may be difficult for PA to perform engagement in accordance with relevant standards
what are some safeguards for the level of fees?
- adjust fees
- have reviewer review work done
for what may the PA not receive contingent fees?
preparing a tax return – threat cannot be eliminated as threat level is too high
what are safeguards for contingent fees?
- reviewer
- written agreement with client for remuneration
what are safeguards for referral fees?
- written agreement
- disclosing to clients
when may a PA not hold custody of client assets?
- if not permitted by law
- if derived from illegal activities
what are the requirements for after taking custody of client assets?
- comply with laws
- keep assets sep from personal/firm assets
- use only for intended purpose
when can the PA not take custody of an assurance client’s assets?
if independence threat cannot be eliminated / reduced
what are the objectives of the PA when responding to NOCLAR?
- comply with integrity and professional behavior
- alert mgmt and TCWG of the client
what is NOCLAR in the P3 sense?
acts of omission contrary to laws and regulations committed by a client, mgmt/TCWG thereof
what can NOCLAR lead to?
- fines, litigation
- financial losses to investors
- breaches of env laws
what provisions must the PA know regarding NOCLAR?
- reporting requirements
- prohibition on alerting the client
what does NOCLAR in P3 not relate to?
- inconsequential matters
- personal misconduct unrelated to activities of the client
what are the timing requirements for the PAs response to NOCLAR?
must be on a timely basis
what steps must the PA take when they become aware of NOCLAR during the audit?
- obtain an understanding of the nature
- exercise professional judgement
- discuss with appropriate level of mgmt
- discuss with internal auditors
what must the PA first do if they suspect that mgmt is involved in the NOCLAR?
discuss with TCWG
how must the PA address the matter if mgmt/TCWG is involved in the NOCLAR?
- advise them to take timely and appropriate actions to fix the consequences, disclose to the appropriate authority
- ensure they know their legal responsibilities
how can mgmt/TCWG respond to NOCLAR?
- investigate
- mitigate consequences
- reduce risk of re-occurrence
- disclose to authority if appropriate
what further action can the PA take against NOCLAR?
- disclose
- withdraw
in which situations will disclosure be appropriate for NOCLAR?
- bribery
- company license is at threat
- tax evasion
- selling harmful products
what requirements should the PA follow when disclosing?
- good faith
- exercise caution
- possibly inform client before
