Auditing Fundamentals in a South African Context Graded Questions 3e Solutions Manual
ce (1)
1. When a -
interest and/or intimidation threat to objectivity, as your professional judgement might be
compromised due to bias, and integrity, as you might not be straightforward and honest in
auditing the client. (2)
2. Although it is an established practice and not a new practice, the threat is significant due to
the fee constituting 65% of the firm's fees. (1)
Safeguards that could be taken include the following:
1. Taking steps to reduce the dependency of the client, such as obtaining new clients (1)
2. Conducting external quality control reviews (1)
(1)
1. It creates a self-interest threat to objectivity, as your judgement might be clouded due to
bias, and professional competence and due care, as the possibility exists that you might not
have the necessary knowledge and/or competencies to perform the audit. (2)
2. It will be significant, as 15% of the first yea
of Buy without performing any pre-engagement activities. (1)
3. disclosure to the client upfront and in writing regarding payment
of the fee. (1)
[10]
QUESTION 9 LEVEL 2
1. John is a CA(SA) (and a registered auditor), therefore he has to comply with the SAICA Code
of Professional Conduct. (1)
2. John and the chairman of the board of one of John's audit clients play golf together every
Wednesday which could cause independence issues. (1)
a) Such a personal relationship with a client could result in a self-interest, familiarity or
intimidation threat to the fundamental principle of objectivity, as John's professional
judgement might be compromised due to bias. (1)
b) The level of the threat could be significant, as John will not be seen by a third party as
being independent and he might also not be independent in mind. (1)
3. The following steps could be taken to reduce the threat to an acceptable level:
a) John could be removed from the audit. (1)
b) The work already performed by him could be reviewed by an independent CA(SA). (1)
c) He could decline the audit. (1)
4. A car is offered to the audit partner at a rate lower than the going commercial rate which
could have an impact on his independence. (1)
a) This creates a self-interest threat to objectivity as his judgement might be affected. (1)
b) The level of the threat could be significant, as the generous offer could af
independence. (1)
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Auditing Fundamentals in a South African Context Graded Questions 3e Solutions Manual
5. In an attempt to reduce the threat to an acceptable level, John could:
a) turn down the offer; or (1)
b) buy the car at the going commercial rate. (1)
QUESTION 10 LEVEL 2
Pr
1.
(1)
Smart Books are offering the trainee accountants a 10% discount on
their textbooks. (1)
This might create a self-interest threat to their objectivity as their
professional judgement might be affected because of the discount
received. (1)
Ben was also asked if he could recommend any hardworking people to
Smart Books. (1)
Providing recruiting services could create self-interest, familiarity or
intimidation threats to objectivity. (1)
Ben is a friend of the HR director. (1)
This might create a familiarity threat to objectivity as Ben's
professional judgement might be clouded as a result of the friendship. (1)
2. (1)
(1)
This might create a familiarity threat to his objectivity as his
professional judgement might be compromised due to their being
related. (1)
James owns shares in Smart Books. (1)
This will create a self-interest threat to objectivity as he might not
apply proper judgement due to his interest in Smart Books. (1)
Avai
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