Services related to corporate finance
Providing services related to corporate finance can create threats of intercession and self-control. Such services include, in particular, assistance to the customer in the development of the corporate strategy, identification of possible investment or acquisition facilities, consultations on sales and other alienation transactions, assistance in financing transactions, provision of consultations on restructuring.
Provision of such services is possible when taking precautionary measures, namely: attracting employees who are not members of the audit team to provide such services.
In case the outcome of the consultation on corporate finance depends on the specific method of accounting for an economic transaction or its presentation in the financial statements, and at the same time:
a) the auditor has reasonable grounds to doubt the correctness of this method of accounting or presentation in accordance with applicable financial reporting requirements;
b) the consequences of the consultation on corporate financing will have a significant impact on the financial statements for which the audit firm will express an opinion, the self-control threat that emerged will be so significant that no precautionary measures will not be able to reduce it to an acceptable level, and in that case such a service should not be provided by an audit organization.
The provision of corporate finance services, including advising on the promotion of auditor shares in the market, transactions with them or with their placement, creates a threat of intercession or self-control so significant that no precautionary measures can reduce it to an acceptable level. Therefore, the auditor should not provide such services to the audit client.
Litigation between the audit client and the auditor, existing or possible
Threats of personal interest and blackmail arise when there is or perhaps a trial between the audit client and the auditor. The relationship between the management of the audit client and the members of the audit team should be characterized by absolute impartiality and openness with regard to all the activities of the customer. If the audit client's management and the auditor are in a state of confrontation as a result of an ongoing or possible litigation that affects the decision of the client's management to disclose information completely, there are threats of personal interest and blackmail. The significance of the emerging threats depends on the following factors:
a) the materiality of the trial;
b) does the trial have a relationship to the previous audit.
The significance of such threats should be assessed, and if necessary, precautions should be taken to eliminate threats or to reduce them to an acceptable level. Examples of such precautions are, in particular:
a) in the case where a member of the audit team is involved in the proceedings, - excluding him from the audit team;
b) holding a third person with the necessary professional knowledge and qualifications, checking the results of the work performed.
If such precautions do not allow you to reduce threats to an acceptable level, the only possible action is to stop or reject the audit task.
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