Q1 Q4

Question 1

Ethical Issue P1

Answer 1

The importance of auditor independence and objectivity is emphasised by the EU auditing directive and the FRS ethical framework.
Because of this scenario it raises concerns about the auditors ability to maintain independence and objectivity.

Question 2

Ethical Issue P2

Answer 2

FRC Ethical Standards requires auditors to identify and evaluate threats to independence and implement measures to reduce risks.
Because of the scenario there is a significant threat to independence which can undermine the integrity of the audit process

Question 3

Improve audit quality P1

Answer 3

Strengthening guidelines, regulatory authorities can improve ethical aspects of auditing.
The guidelines provide guidance on independence, integrity and objectivity, which will protect public interest and build trust in the auditing profession.

Question 4

Improve audit quality - P2

Answer 4

Regularly switching to another auditor to reduce the risk of auditors becoming too familiar with the company and minimises the risk of long term relationships.
New auditors can bring new view points, which can help the company.