Question

For each scenario below, identify the most appropriate client acceptance/continuance risk(s) (A-C).

- A. Independence

- B. Scope Limitation Imposed by Client

- C. Integrity of Management

Scenarios	Risk(s)
The same partner has had this client as part of her portfolio for the past 20 years.
The managers at one of your client are experts in their product fields, but struggle with understanding the importance of and the requirements in relation to producing and maintaining financial information.
One of your client’s employees informed you they are routinely instructed by one of the directors to alter product quality test results.
Previous audit manager, who dealt with the audit for the last 15 years, has recently taken a senior finance position at your firm’s client.
Your firm’s new partner is the brother of the finance director at one of your firm’s clients.

Answer 1

Case A
As per International Standards on Auditing provide provision on relating Independence:

Policies & procedures should enable:

• Communication of independence requirements to personnel & others.
• Identification of circumstances threatening independence
• Take appropriate action for elimination of threats /withdrawal from engagement.
• Resolution of breaches of independence.

Case B

As per International Standards on Auditing provide provision on relating precondition of audit

1.Determine whether the FRF is acceptable.

2.Obtain agreement of mngt that it understands its responsibilities for:

• Preparation of F.S.
• Exercising necessary Internal Controls to enable the preparation of F.S. that are free from material misstatements.
• To provide the auditor:
  • Access to all relevant info
  • Additional info that auditor requests from mngt
  • Unrestricted access to persons within the entity.

Case 3

Intrigity of Management is provide free access to auditor and management objective is not biased

further provided management provide  management presentation to auditor regarding they are doing proper risk assemeent procedure

Conclusion

New partner brother influence independence as above applying provision given fact in question