Performing a significant part of the clients internal

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Unformatted text preview: l providing internal audit services will assume management responsibility. 17) Providing services to an audit client involving the design or implementation of IT systems that (a) form a significant part of the internal control over financial reporting or (b) generate information that is significant to the client’s accounting records or financial statements on which the firm will express an opinion creates a self-review threat. 18) Litigation support services may include activities such as acting as an expert witness, calculating estimated damages or other amounts that might become receivable or payable, and assistance with document management and retrieval. These services may create a self-review or advocacy threat. 19) Acting in an advocacy role for an audit client in resolving a dispute or litigation when the amounts involved are material to the financial statements on which the firm will express an opinion would create advocacy and self-review threats so significant that no safeguards could reduce the threat to an acceptable level. 20) The firm may generally provide such recruiting services as reviewing the professional qualifications of a number of applicants and providing advice on their suitability for the post. In addition, the firm may interview candidates and advise on a candidate’s competence for financial accounting, administrative, or control positions. 21) Providing corporate finance services may create advocacy and self-review threats. a) If the effectiveness of corporate finance advice depends on a material, doubtful accounting treatment or presentation in the financial statements, the self-review threat would be so significant that no safeguards could reduce the threat to an acceptable level. 22) When the total fees from an audit client represent a large proportion of the total fees of the firm expressing the audit opinion (or a partner or office), the dependence on that client and concern about losing the client creates a self-interest or intimidation threat. a) A self-interest threat may be created if overdue fees remain unpaid for a long time, especially if a significant part is not paid before the issue of the audit report for the following year. Generally, the firm is expected to require payment of such fees before such audit report is issued. 23) A key audit partner must not be evaluated on or compensated based on that partner’s success in selling non-assurance services to the partner’s audit client. 24) Accepting gifts or hospitality from an audit client may create self-interest and familiarity threats. If a firm or a member of the audit team accepts gifts or hospitality, unless the value is trivial and inconsequential, the threats created would be so significant that no safeguards could reduce the threats to an acceptable level. 25) When the firm and the client’s management are placed in adversarial positions by actual or threatened litigation, affecting management’s willingness to make complete disclosures, self-interest and intimidation threats are created. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited.
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This note was uploaded on 04/02/2013 for the course ACCT 7100 taught by Professor Swanson during the Spring '13 term at Valdosta State University .

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