| 1 | APB Ethical Standard 1 requires the audit engagement partner to identify and assess the circumstances which could adversely affect the auditor's objectivity ('threats'), including any perceived loss of independence, and to apply procedures ('safeguards') which will either: |
| (a) | eliminate the threat; or |
| (b) | reduce the threat to an acceptable level (that is, a level at which it is not probable that a reasonable and informed third party would conclude that the auditor's objectivity and independence either is impaired or is likely to be impaired). |
| When considering safeguards, where the audit engagement partner chooses to reduce rather than to eliminate a threat to objectivity and independence, he or she recognises that this judgment may not be shared by users of the financial statements and that he or she may be required to justify the decision. |
| 2 | This Standard provides requirements and guidance on specific circumstances arising out of long association with the audit engagement, which may create threats to the auditor's objectivity or perceived loss of independence. It gives examples of safeguards that can, in some circumstances, eliminate the threat or reduce it to an acceptable level. In circumstances where this is not possible, the auditor either does not accept or withdraws from the audit engagement, as appropriate. |
| 3 | Whenever a possible or actual breach of an APB Ethical Standard is identified, the audit engagement partner, in the first instance, and the ethics partner, where appropriate, assesses the implications of the breach, determines whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and considers whether there is a need to resign from the audit engagement. |
| 4 | An inadvertent violation of this Standard does not necessarily call into question the audit firm's ability to give an audit opinion provided that: |
| (a) | the audit firm has established policies and procedures that require all partners and staff to report any breach promptly to the audit engagement partner or to the ethics partner, as appropriate; |
| (b) | the audit engagement partner or ethics partner ensures that any matter which has given rise to a breach is addressed as soon as possible; |
| (c) | safeguards, if appropriate, are applied (for example, by having another partner review the work done by the relevant partner or member of staff or by removing him or her from the engagement team): and |
| (d) | the actions taken and the rationale for them are documented. |
|
|
Licence and copyright | © 2018, LexisNexis Group a division of Reed Elsevier (UK) Ltd. All rights reserved. |