新老划断介绍

1ThefundamentalProfessionalaccountantsshouldbestraightforwardhonestinallprofessionalandbusinessrelationships.Integrityalsoimpliesfairdealingandtruthfulness.Professionalaccountantsshouldnotallowbias1ThefundamentalProfessionalaccountantsshouldbestraightforwardhonestinallprofessionalandbusinessrelationships.Integrityalsoimpliesfairdealingandtruthfulness.Professionalaccountantsshouldnotallowbias,conflictsofinterestortheundueinfluenceofotherstooverridetheirprofessionalorbusinessjudgement.anddueProfessionalaccountantsshouldmaintainprofessionalknowledgeandskillatthelevelrequiredtoensurethataclientreceivescompetentprofessionalservices,andtoactdiligentlyandinaccordancewithapplicabletechnicalandprofessionalstandards.Professionalaccountantsshouldrespecttheconfidentialityofinformationacquiredasaresultofprofessionalandbusinessrelationshipsand,therefore,notProfessionalaccountantsshouldrespecttheconfidentialityofinformationacquiredasaresultofprofessionalandbusinessrelationshipsand,therefore,nottodiscloseanysuchinformationtothirdpartieswithoutproperauthority,norusetheinformationforpersonaladvantage.Professionalaccountantsshouldensuretheycomplywithrelevantlawsandregulationsandshouldavoidanyactionthatdiscreditsthe新老划2FIVEethical•••••Asweprogressthrough新老划2FIVEethical•••••Asweprogressthroughtherestofthechapteryouwillseetherearesomeethicalrequirementsrelatingpurelytopublicinterestentities.Required:CommentontheethicalandprofessionalissuesarisingfromyourreviewoftheauditworkingpapersandrecommendanyactionswhichshouldnowbetakenbyFirm.(5-10-15)2.1Self-interestRelatestotheriskthatafinancialor2.1Self-interestRelatestotheriskthatafinancialorotherinterestinaclientwillinappropriatelytheprofessionalaccountant'sjudgementor(a)FinancialTheACCAdoesnotallowthefollowingtoowna(a)FinancialTheACCAdoesnotallowthefollowingtoownadirectfinancialinterestoranindirectmaterialfinancialinterestinaclient:TheauditAmemberoftheauditAnimmediatefamilymemberofamemberoftheauditThefollowingsafeguardswillthereforebeDisposingoftheRemovingtheindividualfromtheteamifKeepingtheclient'sauditcommitteeinformedoftheUsinganindependentpartnertoreviewworkcarriedoutifEx-WireCoisanauditclientwhoseoperationsinvolvehaulageanddistribution.LesterEx-WireCoisanauditclientwhoseoperationsinvolvehaulageanddistribution.LesterFreeman,theauditengagementInJuly2014,RussellBell,theWireCo’sformerfinancedirector,joinedtheauditfirmasanauditpartner,workinginthesameofficeasLesterFreeman.AlthoughRussellwasnotamemberoftheauditteam,hedidupdateLesteronsomebusinessdevelopmentswhichhadtakenplaceatthecompanyduringtheperiodbeforeheleft.RussellheldanumberofequitysharesinWireCo,whichhesoldinJanuary2015.RussellretainedashareholdinginWireCoforsixmonthsafterhisappointmentasanauditpartnerinBunk&Co.Thisgivesrisetoaself-interestthreattoobjectivity,asitwouldhavebeeninRussell’sintereststoactinsuchawayastomaximisehisfinancialinterestinWireCountilthepointwhenhesoldhisshares.ThereisageneralRussellretainedashareholdinginWireCoforsixmonthsafterhisappointmentasanauditpartnerinBunk&Co.Thisgivesrisetoaself-interestthreattoobjectivity,asitwouldhavebeeninRussell’sintereststoactinsuchawayastomaximisehisfinancialinterestinWireCountilthepointwhenhesoldhisshares.Thereisageneralprohibitiononauditorsholdingafinancialinterestinanauditclient,andtheCodestatesthatwhenafinancialinterestarises,itshouldbedisposedofimmediately.GivenRussell’sseniority,andthefactthatheseemstohavecloselyadvisedtheauditteamonmattersrelatingtoWireCo,heshouldhavemadethedisposalimmediately.【MJ：AAA特点，反思事务所自己的内控ConcernsmayariseoverBunk&Co’s【MJ：AAA特点，反思事务所自己的内控ConcernsmayariseoverBunk&Co’sproceduresinrelationtoandpartnerdisclosureoffinancialinterestsinauditedentities.Sixmonthsisalongperiodforthesharestohavebeenheld,andthefirmshouldhaveproceduresinplacetoensurethatsuchmattersaremonitoredandquicklyresolved.Areviewofthefirm’sproceduresshouldtakeplace,andRussellshouldbeaskedwhyhedidnotdisposeofthesharesmorequickly.【MJ：AAA高分点，根据分值决定】共同开捆绑销相互推(b)ClosebusinessExamplesofwhenanauditfirmandan共同开捆绑销相互推(b)ClosebusinessExamplesofwhenanauditfirmandanauditclienthaveaclosebusinessrelationshipHavingafinancialinterestinajointventurewitheithertheclientoracontrollingowner,director,officerorotherindividualwhoperformsseniormanagerialactivitiesforthatclientArrangementstocombineoneormoreservicesorproductsofthefirmwithoneormoreservicesorproductsoftheauditclientandtomarketthepackagewithreferencetobothpartiesDistributionormarketingarrangementsunderwhichthefirmactsasdistributorormarketeroftheauditclient'sproductsorservicesorviceversaItwillbenecessaryforthepartnerstojudgethematerialityoftheinterestandthereforeitssignificance.However,unlesstheinterestisclearlyinsignificant,anauditprovidershouldnotparticipateinsuchaventurewithanauditclient.Appropriatesafeguardsarethereforetoendtheassuranceprovisionortoterminatethe(other)businessrelationship.Ex-IalsoworkedontheauditofCampbellCo,whereIheardthemanagingdirector,TingCampbell,discussingapotentialnewbusinessopportunitywiththeauditengagementEx-IalsoworkedontheauditofCampbellCo,whereIheardthemanagingdirector,TingCampbell,discussingapotentialnewbusinessopportunitywiththeauditengagementpartner.CampbellCoisaneventsorganiser,andisplanningtorunaprogrammeofnationwideeventsforaccountants,atwhichspeakerswilldiscusstechnicalupdatestofinancialreporting,taxandauditregulations.Tingproposedthatourfirmcouldinvestsomecashinthebusinessopportunity,supplythespeakers,markettheeventstoourauditclients,andthatanyprofitmadewouldbesharedbetweenRyder&CoandCampbellCo.Whatwouldbetheimplicationsofourfirmconsideringbusiness(7Aself-interestthreattoobjectivityarises,becauseRyder&Cowillbenefitfinanciallyiftheeventsaresuccessful.Unlessanyfinancialinterestisimmaterialandthebusinessrelationshipisinsignificanttothefirmandtheclientoritsmanagement,thethreatcreatedwouldbeAself-interestthreattoobjectivityarises,becauseRyder&Cowillbenefitfinanciallyiftheeventsaresuccessful.Unlessanyfinancialinterestisimmaterialandthebusinessrelationshipisinsignificanttothefirmandtheclientoritsmanagement,thethreatcreatedwouldbesosignificantthatnosafeguardscouldreducethethreattoanacceptablelevel.Thefactthattheeventsarenationwideimpliesthatitisareasonablylargeoperationandcouldthereforebeassessedasnotissignificant.ThebusinessrelationshipwithCampbell&Coshouldnotbeenteredinto.(c)EmploymentwithanauditIftheauditclientisapublicinterestentity,'coolingoff'periodsarerequired.TheACCACodestatesthatwhenakey(c)EmploymentwithanauditIftheauditclientisapublicinterestentity,'coolingoff'periodsarerequired.TheACCACodestatesthatwhenakeyauditpartnerjoinssuchaclient,eitherasadirectororasanemployeewithsignificantinfluenceonthefinancialstatements,independencewouldbedeemedtobecompromisedunless:Subsequenttothepartnerceasingtobeakeyauditpartner,thepublicinterestentityhadissuedauditedfinancialstatementscoveringaperiodofnotlessthantwelvemonths.Thepartnerwasnotamemberoftheauditteamwithrespecttotheauditofthosefinancialstatements.除非该合伙人不再担任关键审计合伙人除非该合伙人不再担任关键审计合伙人后，该公众利益实体发布了已审计财务报表，其涵盖•间不少于12个月，并且该合伙人不是该财务报表的审计项目组成员，否则独立性将视为受损害。从不再担任关键审计合伙人至最早可以加入客户的这一期间，称为“冷却期”客户并担任董事、高级管理人员或特定员工的时间是在2011年4月1InthecaseofaseniorormanagingpartnerjoininganInthecaseofaseniorormanagingpartnerjoininganauditclient,12monthsmusthavepassedsincetheindividualwasseniorormanagingpartner(iethereisnorequirementforauditedfinancialstatementstohavebeenissued).前任高级合伙人加入审计客户担任重要职户，担任董事、高级管理人员或特定员工，将因外在个月，否则独立性将视为收到损(d)TemporarystaffStaffmaybeloanedtoanauditclient,butonlyforashortperiod(d)TemporarystaffStaffmaybeloanedtoanauditclient,butonlyforashortperiodoftime.Staffmustnotassumemanagementresponsibilities,orundertakeanyauditworkthatisprohibitedelsewhereintheTheauditclientmustberesponsiblefordirectingandsupervisingtheactivitiesoftheloanedstaff.Possiblesafeguardsinclude:ConductinganadditionalreviewoftheworkperformedbytheloanedstaffNotgivingtheloanedstaffauditresponsibilityforanyfunctionoractivityontheauditthattheyperformedduringthetemporarystaffNotincludingtheloanedstaffintheaudit(e)PartneronclientApartneroremployeeof(e)PartneronclientApartneroremployeeofanauditfirmshouldnotserveontheboardofanauditclient.Itmaybeacceptableforapartneroranemployeeofanauditfirmtoperformtheroleofcompanysecretaryforanauditclient,iftheroleisessentiallyadministrative.Ex-TheGroupcurrentlyhasthreenon-executivedirectors,whoformtheGroupauditcommittee.UntilJanuary20X5,therewasafourthnon-executivedirectorwhowasalsothefinancialreportingexpertoftheGroupauditcommittee.TheGroupislookingtofindaEx-TheGroupcurrentlyhasthreenon-executivedirectors,whoformtheGroupauditcommittee.UntilJanuary20X5,therewasafourthnon-executivedirectorwhowasalsothefinancialreportingexpertoftheGroupauditcommittee.TheGroupislookingtofindareplacement,butisfindingitdifficulttorecruitforthisposition,andhasrequestedthataseniorpartnerfromSquire&CobecomeamemberoftheGroupauditcommitteewhileareplacementisbeingsought.Answer-Partnertoserveonaudit•ShouldapartnerfromSquire&Cotakethisappointment,aself-reviewthreattoobjectivityarisesbecauseanauditcommitteememberisinapositiontoexertinfluenceoverthefinancialstatements,andtheauditteamwouldbelesslikelytochallengeissuesduringtheaudit,therebylosingtheirprofessionalAnswer-Partnertoserveonaudit•ShouldapartnerfromSquire&Cotakethisappointment,aself-reviewthreattoobjectivityarisesbecauseanauditcommitteememberisinapositiontoexertinfluenceoverthefinancialstatements,andtheauditteamwouldbelesslikelytochallengeissuesduringtheaudit,therebylosingtheirprofessionalAself-interestthreatalsoarisesbecausetheauditfirm’sinterestsbecomecloselyalignedtotheinterestsoftheGroup,impactingonauditorobjectivity.Forthesereasons,theCodestatesthatapartneroranemployeeoftheauditfirmshallnotserveasadirectororofficerofanauditclient.Therefore,Squire&Cocannotprovideaseniorpartner,oranyothermemberofstaff,toserveontheGroup’sauditcommittee.••MarkingUpto1markforeachMarkingUpto1markforeachpointAuditfirmpartnerservingonGroupauditcommittee–self-reviewthreatAuditfirmpartnerservingonGroupauditcommittee–self-interestthreatSafeguardscannotreducetoanacceptablelevelsocannotprovidepartnertoserveonauditcommittee(f)FamilyandpersonalFamilyorclosepersonalrelationshipsbetweenauditfirmandclientstaffcouldseriouslythreatenindependence.Eachsituationhastobeevaluatedindividually.Factorstoconsiderare:Theindividual'sresponsibilitiesontheauditThe(f)FamilyandpersonalFamilyorclosepersonalrelationshipsbetweenauditfirmandclientstaffcouldseriouslythreatenindependence.Eachsituationhastobeevaluatedindividually.Factorstoconsiderare:Theindividual'sresponsibilitiesontheauditTheclosenessoftheTheroleoftheotherpartyattheauditWhenanimmediatefamilymemberofamemberoftheauditteamisadirector,anofficeroranemployeeoftheauditclientinapositiontoexertdirectandsignificantinfluenceoverthesubjectmatterinformationoftheauditengagement,theindividualshouldberemovedfromtheauditteam.(g)CompensationandevaluationThereisaself-interestthreatwhenamemberoftheauditteamis(g)CompensationandevaluationThereisaself-interestthreatwhenamemberoftheauditteamisevaluatedonsellingnon-assuranceservicestotheclient.Thesignificanceofthethreatdependson:Theproportionoftheindividual'scompensationorperformanceevaluationthatisbasedonthesaleofsuchservicesTheroleoftheindividualontheauditWhetherpromotiondecisionsareinfluencedbythesaleofsuchThefirmshouldeitherrevisethecompensationplanorevaluationprocess,orputinplaceappropriatesafeguards.Safeguardsinclude:RemovingthememberfromtheauditHavingtheteammember'sworkreviewedbyaprofessionalAkeyauditpartnershallnotbeevaluatedorcompensatedbasedontheirsuccessinsellingnon-assuranceservicestotheirauditclient.Ex-Bunk&Cohasbeendevelopinginitiativestoincreasethefirm’sincome.Oneinitiativeisthatauditteammembersshouldbeencouragedtocross-sellEx-Bunk&Cohasbeendevelopinginitiativestoincreasethefirm’sincome.Oneinitiativeisthatauditteammembersshouldbeencouragedtocross-sellnon-auditservicesandreferencestotargetsforthecross-sellingofnon-auditservicestoauditclientsisnowincludedinpartnerandemployeeappraisaldocumentationTheCodestatesthataself-interestthreatisTheCodestatesthataself-interestthreatiscreatedwhenamemberoftheauditteamisevaluatedonorcompensatedforsellingnon-assuranceservicestothatauditclient.Thisisbecausetheauditteammemberclearlyhasafinancialinterestinsuccessfulcross-selling.Thesignificanceoftheself-interestthreatdepends•Theproportionoftheindividual’scompensationorperformanceevaluationwhichisbasedonthesaleofsuchservices;Theroleoftheindividualontheauditteam;Whetherpromotiondecisionsareinfluencedbythesaleofsuch••TheCodestatesthatakeyauditpartnershallnotbeevaluatedonorcompensatedbasedonthatpartner’ssuccessinsellingnon-assuranceservicestothepartner’sauditThereforeifBunk&Coistocontinuewiththispolicy,caremustbetakenthatpartners’performancearenotevaluatedbasedontheirsuccessincross-sellingtotheirauditclients.ItisnotprohibitedforotherauditTheCodestatesthatakeyauditpartnershallnotbeevaluatedonorcompensatedbasedonthatpartner’ssuccessinsellingnon-assuranceservicestothepartner’sauditThereforeifBunk&Coistocontinuewiththispolicy,caremustbetakenthatpartners’performancearenotevaluatedbasedontheirsuccessincross-sellingtotheirauditclients.Itisnotprohibitedforotherauditteammemberstocross-sell,butsafeguardsmustbeinplacetoreducethepotentialthreattoanacceptablelevel,suchasareviewofauditwork(h)GiftsandUnlessthevalueofthegift/hospitalityistrivialandinconsequential,afirmora(h)GiftsandUnlessthevalueofthegift/hospitalityistrivialandinconsequential,afirmoramemberofanauditteamshouldnotaccept.Ex-Asaresultofyourauditreviewvisitattheclient’spremises,youhavelearnedthattheauditteamwasinvitedtoandsubsequentlyattendedCleanCo’sannualofficeparty.Theclientprovidedeachmemberoftheauditteamwithafreevoucherworth$30whichcouldberedeemedatthevenueduringtheparty.Theauditsenior,PaulaMetcalfe,whohasworkedontheauditforthelastthreeyearshasinformedyouthattheauditteamEx-Asaresultofyourauditreviewvisitattheclient’spremises,youhavelearnedthattheauditteamwasinvitedtoandsubsequentlyattendedCleanCo’sannualofficeparty.Theclientprovidedeachmemberoftheauditteamwithafreevoucherworth$30whichcouldberedeemedatthevenueduringtheparty.Theauditsenior,PaulaMetcalfe,whohasworkedontheauditforthelastthreeyearshasinformedyouthattheauditteamhasalwaysbeenencouragedtoattendthepartyinordertodevelopgoodclientrelations.Answer-OfficeClienthospitality(attendanceatparty)maycreatefamiliarityrisksasauditstaffmaybegettingtooclosetoclientespeciallygiventhatthishappenseveryyear.Thiscloserelationshipmayresultintheauditteambecominglessobjectiveandlessabletochallengeexplanationsprovidedbytheclient.TheCodealsostatesthatgiftsfromAnswer-OfficeClienthospitality(attendanceatparty)maycreatefamiliarityrisksasauditstaffmaybegettingtooclosetoclientespeciallygiventhatthishappenseveryyear.Thiscloserelationshipmayresultintheauditteambecominglessobjectiveandlessabletochallengeexplanationsprovidedbytheclient.TheCodealsostatesthatgiftsfromaclienttoamemberoftheauditteammaycreateaself-interestthreat.Withreferencetotheofficepartytherefore,theauditstaffarereceivingadirectfinancialbenefitfromtheclient(inthiscaseintheformofvouchers).Unlessthevalueofsuchgiftsistrivialandinconsequential,theself-interestthreatwouldbetoosignificanttomitigatewithsafeguardsandthegiftsshouldnotbeaccepted.Theauditfirmshouldconsiderintroducinginternalauthorisationproceduresinordertoensuretransparencyandtoestablishwhetherthevalueistrivialandinconsequential.【MJ：AAA】Inthiscase,thevalueof$30perheaddoesappeartobetrivialbuttheauditormightstillconsiderdecliningthegiftsinordertomaintainavisibleprofessionaldistancefromaclientwhichmaybeinvolvedincriminalactivities.【MJ:和a问洗黑钱有关联的，灵活-实务结论】【MJ：AAA特点，反思事务所自己的内控MarkingOfficeparty【MJ：AAA特点，反思事务所自己的内控MarkingOfficeparty-Upto1markforeachpointClienthospitality(attendanceatparty)maycreatefamiliarityrisksasauditstaffmaybegettingtooclosetoclientespeciallygiventhatthishappenseveryyearGiftsmaycreateself-interestriskasauditstaffreceivingdirectfinancialbenefitfromclientUnlessvalueistrivialandinconsequential,threatswouldbetoosignificanttomitigatewithsafeguardsandshouldnotbeacceptedAuditorshouldhaveinternalauthorisationprocedurestoestablishwhethervalueistrivialandinconsequentialInthiscase,valueappearstrivialbutauditorshouldconsiderdeclininggivenpossiblecriminalactivitiesbyclientstaff(i)LoansandTheadviceonloansandguaranteesfallsintotwoTheclientisabankor(i)LoansandTheadviceonloansandguaranteesfallsintotwoTheclientisabankorothersimilarOtherIfalendinginstitutionclient(egabank)lendsanimmaterialamounttoanauditfirmormemberofassuranceteamonnormalcommercialterms,thereisnothreattoindependence.Iftheloanismaterialitwillbenecessarytoapplyappropriatesafeguardstobringtherisktoanacceptablelevel.Asuitablesafeguardislikelytobeanindependentreview(byapartnerfromanotherofficeinthefirm).Loanstomembersoftheauditteamfromabankorotherlendinginstitutionclientarelikelytobematerialtotheindividual,but,providedthattheyareonnormalcommercialterms,thesedonotconstituteathreattoindependence.Anauditfirmorindividualontheauditengagementshouldnotenterintoanyloanorguaranteearrangementwithaclientthatisnotabankorsimilarinstitution(unlessimmaterialtoAnauditfirmorindividualontheauditengagementshouldnotenterintoanyloanorguaranteearrangementwithaclientthatisnotabankorsimilarinstitution(unlessimmaterialtobothpartieswhichisunlikely).Theself-interestthreatcreatedbyenteringintosuchanarrangementwouldbesosignificantthatnosafeguardwouldbeabletoreducethethreattoanacceptablelevel.Inaddition,loansorguaranteesshouldnotbemadeInaddition,loansorguaranteesshouldnotbemadebyanauditfirmoranauditteammembertoanauditclient.Ifanauditfirmguaranteesaloantoanauditclient,theself-interestthreatcreatedwouldbesosignificantthatnosafeguardscouldreducethethreattoanacceptablelevelunlesstheloanorguaranteeisimmaterialtoboththeauditfirmandtheclient.Ex-YourclientportfolioasanauditmanageratCoram&CoalsoincludesTurnerCowhichisalistedfinancialinstitutionofferingloansandcreditfacilitiestobothcommercialandretailcustomers.Oneoftheauditteammembers,JanetteStott,hasprovisionallyagreedtotakeoutaloanwithTurnerCotofinanceEx-YourclientportfolioasanauditmanageratCoram&CoalsoincludesTurnerCowhichisalistedfinancialinstitutionofferingloansandcreditfacilitiestobothcommercialandretailcustomers.Oneoftheauditteammembers,JanetteStott,hasprovisionallyagreedtotakeoutaloanwithTurnerCotofinancethepurchaseofadomesticresidence.Theloanwillbesecuredonthepropertyandtheclient’sbusinessmanagerhaspromisedJanettethathewillensurethatshegets‘theverybestdealwhichthebankcanoffer.’Answer-LoantomemberoftheauditAccordingtotheCode,aloantoamemberoftheauditteammaycreatethreattotheauditor’sindependence.Iftheloanisnotmadeundernormallendingprocedures,andtermsAnswer-LoantomemberoftheauditAccordingtotheCode,aloantoamemberoftheauditteammaycreatethreattotheauditor’sindependence.Iftheloanisnotmadeundernormallendingprocedures,andtermsandconditions,aself-interestthreatwouldbecreatedasaresultofJanetteStott’sfinancialinterestintheauditclient.Theself-interestthreatarisesbecauseofthepotentialpersonalbenefitderivedwhichmaymotivatetheauditteammembertobehaveinamanneraimedatprotectingthatbenefit.Suchathreatwouldbesosignificantthatnosafeguardscouldreducethethreattoanacceptablelevel.Itfollowsthereforethattheauditteammembershouldnotacceptsuchaloanorguarantee.Ifitismadeunderbank’snormallendingprocedures,termsandconditions,theloandoesnotcreateathreattoauditor’sindependenceandJanettemayaccepttheloanAnswer-LoantomemberoftheauditItispossiblethereforethatthesecuredloanmaybeethicallyacceptableAnswer-LoantomemberoftheauditItispossiblethereforethatthesecuredloanmaybeethicallyacceptableandthekeyissueiswhether‘theverybesttermswhichthebankcanoffer’fallwithinTurnerCo’snormallendingprocedures,andtermsandconditions.Thebank’sstandardlendingtermsandconditionsshouldbeobtainedandreviewedalongsidethedocumentationforJanetteStott’sloan.Ultimately,theauditengagementpartnerisresponsibleforensuringthatethicalprinciplesarenotbreached,sothepartnershouldbeinvolvedwiththeThemattershouldbediscussedwithJanetteandtheclient’sbusinessmanagerinordertoestablishwhethertheloanistobemadeunderthebank’snormallendingprocedures.JanetteshouldbeadvisedoftheoutcomeofthereviewandTurnerCo’sbusinessmanagershouldbeadvisedofthisdecision,explainingtherationaleandethicalrulesbehindit.MarkingGenerallyupto1markforMarkingGenerallyupto1markforeachissueandaction.Maximum4Potentialself-interestthreattoauditorKeyissueiswhether‘theverybestdealwhichthebankcanoffer’ismadeundernormallendingprocedures,termsandconditionsIfnot,self-interestthreatcreatedwouldbesosignificantthatnosafeguardscouldreduceittoacceptablelevelandJanetteshouldbetoldnottotakeloanIfitismadeunderbank’snormallendingprocedures,termsandconditions,theloandoesnotcreateathreattoauditor’sindependenceandJanettemayaccepttheloan应试技巧上，评分上：重Issue，MarkingDiscussterms应试技巧上，评分上：重Issue，MarkingDiscusstermsandconditionsofloanwithJanetteandbusinessObtaindraftloandocumentsandreviewdetailsinordertoestablishwhetherundernormallendingprocedures,termsandconditionsInformauditengagementpartnerwhoisresponsibleforethicalAdviseJanetteonoutcomeofreviewandwhethershecanacceptloanandadvisebusinessmanagerofdecisionexplainingrationale/ethicalrulesEx-ConnollyCohasapproacheditsbanktoextenditsborrowingfacilities.Anextensionof$10millionisbeingsoughttoitsexistingloantosupporttheon-goingdevelopmentofnewdrugs.OurfirmhasbeenaskedbytheEx-ConnollyCohasapproacheditsbanktoextenditsborrowingfacilities.Anextensionof$10millionisbeingsoughttoitsexistingloantosupporttheon-goingdevelopmentofnewdrugs.OurfirmhasbeenaskedbythebanktoprovideaguaranteeinrespectofthisloanAnswer-Thebankhasaskedourfirmtoprovideaguaranteeinrespectofthebankloanwhichmaybeadvancedtoourclient.Theprovisionofsuchaguaranteerepresentsafinancialinterestinanauditclient,andcreatesaself-interestthreatbecausetheauditfirmhasaninterestinthefinancialpositionoftheclient,causinglossofobjectivitywhenauditingthefinancialstatements.AccordingtotheCode,ifanauditfirmguaranteesaloantoanauditclient,theself-interestthreatcreatedwouldbesosignificantthatnosafeguardscouldreducethethreattoanacceptablelevelunlesstheAnswer-Thebankhasaskedourfirmtoprovideaguaranteeinrespectofthebankloanwhichmaybeadvancedtoourclient.Theprovisionofsuchaguaranteerepresentsafinancialinterestinanauditclient,andcreatesaself-interestthreatbecausetheauditfirmhasaninterestinthefinancialpositionoftheclient,causinglossofobjectivitywhenauditingthefinancialstatements.AccordingtotheCode,ifanauditfirmguaranteesaloantoanauditclient,theself-interestthreatcreatedwouldbesosignificantthatnosafeguardscouldreducethethreattoanacceptablelevelunlesstheloanorguaranteeisimmaterialtoboththeauditfirmandtheclient.Inthiscasetheloanwouldbematerialasitrepresents5%ofConnollyCo’stotalassets,andwouldalsobeconsideredmaterialinnaturebecauseofthecompany’sneedfortheadditionalfinance.(j)OverdueAself-interestthreatarisesiffeesduefromanauditclientremainunpaidforalongtime,especiallyifasignificantpartisnot(j)OverdueAself-interestthreatarisesiffeesduefromanauditclientremainunpaidforalongtime,especiallyifasignificantpartisnotpaidbeforetheissueoftheauditreportforthefollowingyear.Generallythefirmwillrequirepaymentofsuchfeesbeforesuchanauditreportisissued.Also,inasituationwherethereareoverduefees,theauditorrunstheriskof,ineffect,makingaloantoaclient,whereupontheguidanceabovebecomesrelevant.Auditfirmsshouldguardagainstsignificantfeesbuildingupbydiscussingtheissueswiththosechargedwithgovernanceand,ifnecessary,thepossibilityofresigningifoverduefeesarenotpaid.Ex-TheplanningfortheauditofRenoirCo’sfinancialstatementsfortheyearending31March2016willcommenceshortly.InpreparationtheauditpartnertelephonedRenoirCo’sfinancedirector,JimCassatt,tosetupaplanningmeetingandtoremindhimthatfeesrelatingtoataxengagementfromthepreviousyearwerestillEx-TheplanningfortheauditofRenoirCo’sfinancialstatementsfortheyearending31March2016willcommenceshortly.InpreparationtheauditpartnertelephonedRenoirCo’sfinancedirector,JimCassatt,tosetupaplanningmeetingandtoremindhimthatfeesrelatingtoataxengagementfromthepreviousyearwerestillSelf-interestthreatcreatedbyoverdueDelayaudituntilfeespaid(1Theoverduefeescreateaself-interestthreat.Self-interestthreatcreatedbyoverdueDelayaudituntilfeespaid(1Theoverduefeescreateaself-interestthreat.Thecodestatesthataself-interestthreatmaybecreatediffeesduefromanauditclientremainunpaidforalongtime,especiallyif