Conflicts of interest can arise between accountants
and their client. Conflict of interest can also arise between a client and
another client, and accountants should not act for both parties are in dispute.
and their client. Conflict of interest can also arise between a client and
another client, and accountants should not act for both parties are in dispute.
For example, the accountants may be called upon to
advise two clients who are
advise two clients who are
tendering for the same contract; or they may be
advising a company and also one of its directors who are in dispute. In all
such cases the accountants should no accept assignments where they are put in a
position where they are being asked to advice both sides. On the other hand
they may well be able to put forward proposals to settle the dispute.
Specific examples of conflict of interest include:
·
Provision
of other services to audit clients. It
is customary for auditors in many cases to provide other services as well as
the audit, for example preparing tax computations. This is perfectly acceptable
proving the service does not involve performing executive functions or making
executive action and hence unacceptabl.
Provision
of other services to audit clients. It
is customary for auditors in many cases to provide other services as well as
the audit, for example preparing tax computations. This is perfectly acceptable
proving the service does not involve performing executive functions or making
executive action and hence unacceptabl.
·
Preparation
of accounting records. Care should be taken that the client takes
responsibility for the work done and that objectivity in auditing is not
impaired. The accounting records of public company clients should not be
prepared by the auditor.
Preparation
of accounting records. Care should be taken that the client takes
responsibility for the work done and that objectivity in auditing is not
impaired. The accounting records of public company clients should not be
prepared by the auditor.
·
A
practice should not report on a company if a company associated with the
practice is the company secretary to the client. However, it is acceptable to
provide assistance to the company secretary.
A
practice should not report on a company if a company associated with the
practice is the company secretary to the client. However, it is acceptable to
provide assistance to the company secretary.
·
No person
in an accounting firm should take part in the audit of a company if he or she
has, in the accounting period or, it is recommended, in the previous two years
been an officer or employee of that company.
No person
in an accounting firm should take part in the audit of a company if he or she
has, in the accounting period or, it is recommended, in the previous two years
been an officer or employee of that company.
There is no similar rule regarding a senior member
of the audit staff or a partner joining an audit client, however, where an
individual is indicating an intention to join a client they should be taken
away from any involvement with that client’s affairs as soon as practicable.
Again it is recommended that a ‘cooling-off’ period be instituted where the
individual who proposes to join an audit client is taken away both from the
audit and from any possibility of influencing the course of the audit or the
audit firm’s approach to the audit. The more senior the individual the more
problematic this becomes.
of the audit staff or a partner joining an audit client, however, where an
individual is indicating an intention to join a client they should be taken
away from any involvement with that client’s affairs as soon as practicable.
Again it is recommended that a ‘cooling-off’ period be instituted where the
individual who proposes to join an audit client is taken away both from the
audit and from any possibility of influencing the course of the audit or the
audit firm’s approach to the audit. The more senior the individual the more
problematic this becomes.
If it is not possible to have any sort of
cooling-off period, the audit team should be changed and, if possible, a new
audit approach instituted with a different team. The involvement of the former
employee should be monitored to ensure there is no question of undue influence
being brought to bear on the audit work.
cooling-off period, the audit team should be changed and, if possible, a new
audit approach instituted with a different team. The involvement of the former
employee should be monitored to ensure there is no question of undue influence
being brought to bear on the audit work.
·
Receivership,
liquidation and audits. In general auditors should not accept receiverships or
appointment as a liquidator of client companies without a three year gap
between the assignments. Clearly a liquidator of a company would be inhibited
from taking a negligence action against the auditor if he had himself been the
auditor.
Receivership,
liquidation and audits. In general auditors should not accept receiverships or
appointment as a liquidator of client companies without a three year gap
between the assignments. Clearly a liquidator of a company would be inhibited
from taking a negligence action against the auditor if he had himself been the
auditor.
