7) CPC - Part 3

Question 1

how to identify conflicts of interest ito P3?

Answer 1

• identify potential conflicts pre-acceptance of new client

- identify cause of the conflict and remain alert to changes over time

Question 2

how to evaluate conflicts of interest ito P3?

Answer 2

• more direct the connection between matter and interest = less acceptable level
• evaluate measures which prevent unauth disclosure of confidential info

Question 3

how to address conflicts of interest ito P3?

Answer 3

• 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

Question 4

what should be done ito disclosure for conflicts of interest ito P3?

Answer 4

remain alert to confidentiality

Question 5

what should be done if consent cannot be obtained for conflicts of interest ito P3?

Answer 5

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

Question 6

what should be documented for breaches of conf for conflicts of interest ito P3?

Answer 6

• nature
• measures to prevent disclosure
• why it is appropriate to continue

Question 7

what does professional appointments regard?

Answer 7

acceptance of a new audit client and sketchy activities the potential client is doing

Question 8

what are safeguards to address self-interest in professional appointments?

Answer 8

• assigning sufficient engagement personnel with necessary competencies
• realistic timeframe for performing engagement
• use experts

Question 9

what are some safeguards for changes in professional appointment?

Answer 9

• get info from previous accountant (or other reasonable steps if not available)
• background investigations / info from 3P

Question 10

what must be done if the potential client does not give permission for proposed PA to communicate with existing PA?

Answer 10

decline the appointment, unless (exceptional circumstances), proposed PA has full knowledge and is satisfied with facts

Question 11

what are the requirements for the previous PA?

Answer 11

when asked to respond to proposed PA, comply with laws (confidentiality) and provide info honestly

Question 12

how shall the proposed PA treat info gathered from the previous PA?

Answer 12

with the strictest confidence

Question 13

what are the requirements for changes in audit / review appointments?

Answer 13

get relevant info from previous auditor

Question 14

when should the PA use an expert for professional appointments?

Answer 14

if use is warranted

Question 15

what threat can occur if audit fees offered are too low?

Answer 15

• professional competence and due care

- may be difficult for PA to perform engagement in accordance with relevant standards

Question 16

what are some safeguards for the level of fees?

Answer 16

• adjust fees

- have reviewer review work done

Question 17

for what may the PA not receive contingent fees?

Answer 17

preparing a tax return – threat cannot be eliminated as threat level is too high

Question 18

what are safeguards for contingent fees?

Answer 18

• reviewer

- written agreement with client for remuneration

Question 19

what are safeguards for referral fees?

Answer 19

• written agreement

- disclosing to clients

Question 20

when may a PA not hold custody of client assets?

Answer 20

• if not permitted by law

- if derived from illegal activities

Question 21

what are the requirements for after taking custody of client assets?

Answer 21

• comply with laws
• keep assets sep from personal/firm assets
• use only for intended purpose

Question 22

when can the PA not take custody of an assurance client’s assets?

Answer 22

if independence threat cannot be eliminated / reduced

Question 23

what are the objectives of the PA when responding to NOCLAR?

Answer 23

• comply with integrity and professional behavior

- alert mgmt and TCWG of the client

Question 24

what is NOCLAR in the P3 sense?

Answer 24

acts of omission contrary to laws and regulations committed by a client, mgmt/TCWG thereof

Question 25

what can NOCLAR lead to?

Answer 25

• fines, litigation
• financial losses to investors
• breaches of env laws

Question 26

what provisions must the PA know regarding NOCLAR?

Answer 26

• reporting requirements

- prohibition on alerting the client

Question 27

what does NOCLAR in P3 not relate to?

Answer 27

• inconsequential matters

- personal misconduct unrelated to activities of the client

Question 28

what are the timing requirements for the PAs response to NOCLAR?

Answer 28

must be on a timely basis

Question 29

what steps must the PA take when they become aware of NOCLAR during the audit?

Answer 29

• obtain an understanding of the nature
• exercise professional judgement
• discuss with appropriate level of mgmt
• discuss with internal auditors

Question 30

what must the PA first do if they suspect that mgmt is involved in the NOCLAR?

Answer 30

discuss with TCWG

Question 31

how must the PA address the matter if mgmt/TCWG is involved in the NOCLAR?

Answer 31

• advise them to take timely and appropriate actions to fix the consequences, disclose to the appropriate authority
• ensure they know their legal responsibilities

Question 32

how can mgmt/TCWG respond to NOCLAR?

Answer 32

• investigate
• mitigate consequences
• reduce risk of re-occurrence
• disclose to authority if appropriate

Question 33

what further action can the PA take against NOCLAR?

Answer 33

• disclose

- withdraw

Question 34

in which situations will disclosure be appropriate for NOCLAR?

Answer 34

• bribery
• company license is at threat
• tax evasion
• selling harmful products

Question 35

what requirements should the PA follow when disclosing?

Answer 35

• good faith
• exercise caution
• possibly inform client before