JK is a listed fast food chain engaged in fish and chips. It has two hundred...

 

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JK is a listed fast food chain engaged in fish and chips. It has two hundred restaurants and employs seven thousand employees in the UK. Your firm Arthur Williamson LLP ("AW"), an ICAEW firm of chartered accountants, is the external auditor of JK. You are the audit manager responsible for the audit of JK. Chloe Ashfield, the audit engagement partner and you will be attending JK's forthcoming audit committee meeting. Chloe has provided you with a copy of the audit committee's agenda. She has requested you to go through each agenda item in details and get ready to answer questions from the client. An extract from the agenda is given below: (1) Rotation of the audit engagement partner Chloe is due to be rotated off the audit team as she has been the audit engagement partner for five years. JK's finance director has recently announced his retirement. The audit committee will discuss the chief executive's proposal that Chloe continues in her role to help future audits run smoothly. (2) Invitation to provide non-audit services JK has invited AW to provide the following non-audit services: (a) To assist with, and take responsibility for, the recruitment of a new finance director. (b) To provide payroll services for JK, on an outsourced basis, as the audit committee is unhappy with the performance of the current service provider. AW is going to respond to the audit committee on the invitations in the meeting (3) Potential conflict of interest. AW has advised JK that they have been approached by Pizza Stone Ltd ("Stone") to act as external auditor. Stone is one of JK's major competitors. AW has indicated that they will only accept appointment at Stone if they have JK's informed consent to act. AW has stated that they will implement procedures to address any conflict of interest. JK is a listed fast food chain engaged in fish and chips. It has two hundred restaurants and employs seven thousand employees in the UK. Your firm Arthur Williamson LLP ("AW"), an ICAEW firm of chartered accountants, is the external auditor of JK. You are the audit manager responsible for the audit of JK. Chloe Ashfield, the audit engagement partner and you will be attending JK's forthcoming audit committee meeting. Chloe has provided you with a copy of the audit committee's agenda. She has requested you to go through each agenda item in details and get ready to answer questions from the client. An extract from the agenda is given below: (1) Rotation of the audit engagement partner Chloe is due to be rotated off the audit team as she has been the audit engagement partner for five years. JK's finance director has recently announced his retirement. The audit committee will discuss the chief executive's proposal that Chloe continues in her role to help future audits run smoothly. (2) Invitation to provide non-audit services JK has invited AW to provide the following non-audit services: (a) To assist with, and take responsibility for, the recruitment of a new finance director. (b) To provide payroll services for JK, on an outsourced basis, as the audit committee is unhappy with the performance of the current service provider. AW is going to respond to the audit committee on the invitations in the meeting (3) Potential conflict of interest. AW has advised JK that they have been approached by Pizza Stone Ltd ("Stone") to act as external auditor. Stone is one of JK's major competitors. AW has indicated that they will only accept appointment at Stone if they have JK's informed consent to act. AW has stated that they will implement procedures to address any conflict of interest.

Answer rating: 100% (QA)

31 rotation of audit engagement partner Key audit partners must be rotated after no more than seven years with a minimum break of two years If the cli... View the full answer