(c) Recent service with audit client, financial self-interest and cross-selling services
– Recent service with client creates self-interest, self-review and familiarity threats
– Persons joining audit firm from a client should not be part of that client’s audit team
– Russell seems to have acted as if he were a member of the audit team
– A quality control review should be performed
– Russell’s shareholding creates a self-interest threat
– The shareholding should have been disposed of immediately
– Consider why this did not happen – firm’s policies should be reviewed
– Cross-selling creates a self-interest threat
– Key audit partners should not be evaluated based on cross-selling
– Other audit team members can cross-sell if appropriate safeguards are in place
Maximum marks 9