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- 6 Marks
Question
Where an audit firm owns shares or is a trustee of a trust that holds shares in a client, there is said to be a financial interest in the client’s affairs. According to the IESBA, some selected parties are not allowed to own direct or indirect material financial interest in a client.
Required: i) Explain THREE (3) parties that are not allowed to own direct or indirect financial interest in a client. (3 marks)
ii) Identify THREE (3) safeguards that may be relevant in relation to direct or indirect financial interest in a client. (3 marks)
Answer
i) Three parties not allowed to own direct or indirect financial interest in a client:
- The assurance firm
- A member of the assurance team
- An immediate family member of a member of the assurance team (3 marks)
ii) Three safeguards that may be relevant in relation to direct or indirect financial interest in a client:
- Disposing of the interest
- Removing the individual from the team if required
- Keeping the client’s audit committee informed of the situation (3 marks)
- Topic: Professional responsibility and liability
- Series: APR 2022
- Uploader: Dotse