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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
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
21) Providing corporate finance services may create advocacy and self-review
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
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. www.gleim.com...
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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 .
- Spring '13