Figure 3.3 on page 86 is very useful in helping people to understand how objectivity and independence
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Figure 3.3 on page 86 is very useful in helping people to understand how objectivity and independence issues might be managed. Discuss.
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FIGURE 3.3 Audit firm's control environment and elements to enhance ethical behaviour in a firm providing audit and other assurance services Notes 1 Leadership of the Audit Firm creates the Firm's Control Environment. 2 Similarly, the Audited Entity creates the Entity's Control Environment. 3 The Ethics Partner helps to create and maintain the Firm's Control Environment. 4 An important element of the Entity's Control Environment comprises the role of Those Charged With Governance. 5 The Technical Advisory function gives advice on audit procedures and reporting to the Engagement team via the Engagement Partner. 6 The Engagement team comprises the Engagement Partner, Manager(s), Other Audit Staff, and Other Professional Staff (tax, IT, etc.) providing services to the team, and those who provide quality control or direct oversight of the audit, such as Ethics Partner and Engagement Quality Control Reviewer. 7 The Ethics Partner communicates possible breaches of the firm's policies and procedures to the Engagement Partner. 8 The Engagement Partner evaluates and reports back to the Ethics Partner and course of action is decided. 9 In the event of disagreement between the Engagement Partner and the Ethics Partner, the matter may be discussed with the Engagement Quality Control Reviewer and resolved. 10 The existence of potential threats to objectivity and independence, and safeguards communicated to Those Charged With Governance at the Audited Entity. 11 The Engagement Partner and the Engagement Quality Control Reviewer discuss significant matters arising from the audit. 12 These matters also communicated to Those Charged With Governance at the Audited Entity. 13 Any member of the Engagement team is empowered to communicate with the Ethics Partner. 14 The Engagement Partner prepares the draft Audit Report on the basis of conclusions of the Engagement team. 15 The Engagement Quality Control Reviewer reviews individual procedures and conclusions of the Engagement team. 16 The Engagement Quality Control Reviewer reviews the draft Audit Report before it is finalized. Audited Entity 2 Leadership of the Audit Firm* Part of Audit Team's Chain of Command Firm's Control Environment 3 Entity's Control Environment Elements of the Control Environment Technical Advisory Function* Audit and Assurance Ethics Partner* General Controls Detailed Controls Engagement Quality Control Reviewer* Those Charged with Governance Engagement Team 6 7 8 9 Engagement Partner* 11 10 12 13 14 Other Auditing Professional 15 Staff* 14 16 Audit Report *The asterisk indicates all those persons who are in a position to influence the conduct and outcome of the audit. This includes some or all of the leaders of the audit firm including 'key audit partners and all those within a network firm who can directly influence the outcome of the audit engagement. These are the people known collectively as the 'audit team' by the IFAC Code. 'The FRC Ethical Standard would include these people as 'covered persons'.
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Related Book For
The Audit Process Principles Practice And Cases
ISBN: 9781473760189
7th Edition
Authors: Iain Gray, Louise Crawford, Stuart Manson
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