Question

An audit firm is appointed to audit a client that has recently engaged in a major merger with a company where the audit firm’s senior partner holds shares. Given professional ethics, how should the firm proceed to comply with independence requirements?

A Accept audit; disclose the holding
B Continue if partner is not on engagement
C Either dispose of shares or decline the engagement to maintain independence in both fact and appearance
D Accept; file disclaimer
E Accept; but audit only certain departments
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