You are an audit manager with the firm of Wu, Potter and McKinley, PAs. You and Ray St. Claire, a manager with another PA firm, are having a discussion about auditor independence. Ray says, “On the one hand, the public seems to be demanding more and more assurance from us about more and more aspects of a client’s operations, but to maintain our practice in today’s environment we have to be competitive to be able to attract new clients.”
a. Identify and briefly explain the competitive practice on the part of auditors to which Ray is referring.
b. Why is this perceived as a threat to auditor independence and the quality of audits?
c. With reference to parts a. and b., what could a client do, at least in theory, to take advantage of this situation? What is the reason this strategy might not work?
d. What does the CGA-Canada code of ethics say about this issue?