A financial statement audit engagement the firm

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Unformatted text preview: it client provided that the firm’s or network firm’s personnel do not act or appear to act in a capacity equivalent to a member of audit client management. The threat to independence would be unacceptably high where the firm or network firm provides internal audit services that involve the firm’s or network firm’s personnel taking decisions or making judgments, which are properly the responsibility of management in the normal course of their employment. 290.183 When the firm, or a network firm, provides assistance in the performance of a financial statement audit client’s internal audit activities or undertakes the outsourcing of some of the activities, any self-review threat created may be reduced to an acceptable level by ensuring that there is a clear separation between the management and control of the internal audit by client management and the internal audit activities themselves. 290.184 Performing a significant portion of the financial statement audit client’s internal audit activities may create a self-review threat and a firm, or network firm, should consider the threats and proceed with caution before taking on such activities. Appropriate safeguards should be put in place and the firm, or network firm, should, in particular, ensure that the financial statement audit client acknowledges its responsibilities for establishing, maintaining and monitoring the system of internal controls. The threat to independence is unacceptably high where the firm or network firm cannot perform the financial statement audit of the financial statement audit client without placing significant reliance on the work performed by the firm or network firm for the purposes of the internal audit services engagement. 290.185 Safeguards that should be applied in all circumstances to reduce any threats created to an acceptable level include ensuring that: (a) The audit client is responsible for internal audit activities acknowledges its responsibility for establishing, maintaining monitoring the system of internal controls; and and 83 By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants [Issued January 2007] PART I: BY-LAWS ON PROFESSIONAL ETHICS (b) The audit client designates a competent employee, preferably within senior management, to be responsible for internal audit activities; (c) The audit client, the audit committee or supervisory body approves the scope, risk and frequency of internal audit work; (d) The audit client is responsible for evaluating and determining which recommendations of the firm should be implemented; (e) The audit client evaluates the adequacy of the internal audit procedures performed and the findings resulting from the performance of those procedures by, among other things, obtaining and acting on reports from the firm; and (f) The findings and recommendations resulting from the internal audit activities are reported appropriately to the audit committee or supervisory body. 290.186 Consi...
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This document was uploaded on 09/23/2013.

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