Ethical Threat
The finance director asked that the audit
should be finished in shorter time scale.
This is the intimidation threat on them as they
may feel under pressured to cut corners and
not raise issue in order to satisfy the deadline
and this could compromise the objectivity of
the audit team and the quality of the audit
performed.
A non-executive director of Hurling Co has just
resigned and the director asked whether the
partner of Caving Co can assist them in
recruiting to fulfill this vacancy.
This represent a self-interest threat as the audit
firm can not undertake the recruitment of the
members of the board of Hurling Co, Especially
Ned who will have the key role in overseeing
the audit process and Audit Firm
This is the threat of self-review
The engagement quality Control Reviewer
assigned to Hurling Co was until last year the
audit engagement partner.
This represent familiarity threat as the partner
will have been associated with hurling Co for a
long period of time and so may not retain
professional skepticism and also objectivity.
20% of last year’s audit fee Is still outstanding
and was due to be paid 3 months ago.
A self-interest threat should be arise from the
fee remaining outstanding, as Caving and Co
may feel pressured to agree to certain
accounting adjustment in order to have the
previous year and
The Finance director has requested that this
year audit fee should be based on the profit
before tax. This could constitute as the
contingent fee.
Safeguard
The engagement partner should discuss the
timing of the audit with the finance director to
understand if the audit can commence earlier,
so as to ensure adequate time for the team to
gather evidence.
If this is not possible the partner should politely
inform the finance directors that the team will
undertake the audit in accordance with all
relevant ISA and quality control procedures.
Therefore, the audit is unlikely to be completed
earlier.
If any residual concern still remain or the
intimidation threat continues, then Caving & Co
may need to consider resigning from the
engagement
Caving & Co is able to assist Hurling Co in that
they can undertake such role such as
reviewing a shortlist of candidates and
reviewing qualification and suitability.
However, the firm must ensure that they are
not seen to undertake management decision
and so must not seek out candidates for the
position or make the final decision on who is
appointed.
As Hurling is a listed company, then the
previous audit engagement partner can not
take part in the audit process at least for 2
years (cooling period). An alternative ECQR
should be appointed instead.
Caving and Co should discuss with those charge
with governance the reason why the previous
20% last year’s fee has not been paid. They
should agree a revised payment schedule which
will result in the fees being settled before mush
more work is performed for the current Year
audit.
Caving and Co will not be able to accept
contingent fee and should communicate eith
those charged with governance at Hurling Co
that the external audit fee is need s to be based
Contingent fee gives arise to self-interest on time spent and level of skills and experience
according to ACCA code of Ethics and Conduct. of the required audit team member.
If the audit fee is based on the profit, the team
may be inclined to ignore any adjustment
which could lead to a reduction in profit.

This is self Intrest.