Professional Ethics

Question 1

How long can an engagement partner and other key staff serve on an audit engagement with either a PIE or a UK listed client?

Answer 1

5 years and then a further 5 years must elapse before they can be reapppointed

This period can be extended by 2 years if the audit committee feels it is necessary to maintain the audit quality but additional safeguards must be in place here.

It is 7 years for engagement quality control reviewers, key partners and senior staff for UK listed clients and PIEs

Question 2

How long can an engagement partner hold an audit role with a non-listed client?

Answer 2

10 years - it is implied they should be rotated after this but it might be possible to make a case for them remaining in place

Question 3

For PIEs, total fees charged by the firm for non-audit services must be limited to no more than HOW MUCH of the average of audit fees paid in the last three consecutive financial years

Answer 3

70%

Question 4

For a UK listed or PIE client, fees for audit and non-audit services should not exceed HOW MUCH of the firm’s fee income

Answer 4

10%

Question 5

What is the fee % limit for non-listed clients?

Answer 5

15%

Question 6

What is the individual recurring fee % limit threshold in the ethical standard for having to monitor as a % of firm total revenue?

Answer 6

5%-10%

This is an issue of self-interest

If it gets to 10%+ then we need to cease non-audit services

Question 7

What actions do we do when performing audit and non-audit work for the same client?

Answer 7

• use separate teams

- DONT need an information barrier

Question 8

What risk and what action is there when we provide non-audit services in addition to audit services?

Answer 8

Management risk and Need to ‘inform management’.

Question 9

What should an auditor consider when tendering or accepting work?

Answer 9

Technical competence
Resources
Independence
Money laundering
References/risk assessment
Outgoing auditors
Terms of engagement

Question 10

What should you do if total client fees are between 5-10% of total firm income?

Answer 10

Inform ethics partner + audit committee

Monitor fees on an ongoing basis

Consider resigning some services if necessary

If the company is a plc then if more than 5% of firm’s total fees are from the plc then there may be undue dependence

Check if all fees are recurring / verify the %

An additional independent QC review could occur

Question 11

What safeguards can you put in place so you can audit and accounts prep for a public company?

Answer 11

None - it is prohibited.

You can do so for a private company but only with the appropriate safeguards in place.