ACCA · Question 01 · Audit framework and regulation
CASE 1: NEXUSCLOUD LTD
NexusCloud Ltd is a rapidly growing SaaS (Software as a Service) technology startup. You are an audit manager at TechAudit LLP. NexusCloud is preparing for an IPO and has requested TechAudit to provide both the statutory audit and IT system design services for their new revenue recognition platform. The audit committee currently consists of the CEO, the CFO, and one independent non-executive director. The engagement partner has just rotated onto the audit after the previous partner served for 7 years.
Regarding the request to provide IT system design services for the new revenue recognition platform, which of the following statements correctly identifies the ethical threat and the appropriate safeguard?
Answer options:
It creates a self-interest threat; the safeguard is to use separate teams for the audit and the IT design.
It creates a self-review threat; the firm should decline the IT system design engagement.
It creates an advocacy threat; the safeguard is to obtain pre-approval from the audit committee.
It creates a familiarity threat; the safeguard is to have an independent partner review the IT design work.
18 questions · hints · full answers · grading
Expert