FRC Ethics, Provisions available for audits of small entities Flashcards
Section 6 relaxes some of the ethical rules for smaller entities by using exemptions and additional disclosures. It applies to the audit of companies that qualify as small under the Companies Act 2006.
What entities does Section 6 of the Ethical Standard apply to?
It applies to the audit of companies that qualify as small under the Companies Act 2006.
What provision is made for auditors of small entities regarding Paragraph 4.31, where fees from a client are expected to exceed 10% but not exceed 15% of the firm’s income?
There is no requirement for an external independent quality review, but the issue must be disclosed to the ethics partner and those charged with governance at the client.
What provisions apply to small entities under Section 5 regarding non-audit services?
The firm is not required to apply safeguards for the self-review threat if there is:
> Informed management
> More regular ‘cold reviews’ of audits where non-audit services have been provided
> Disclosure of the non-audit services in the audit report.
Under what conditions can an audit firm continue as the auditor if an audit partner joins the client, as per Paragraph 2.45?
The firm can continue as auditor provided:
* There is no significant threat to the audit team’s integrity, objectivity, and independence
* Disclosure of the partner joining the client is made in the audit report.
