CAT / FIA FAU Syllabus A. Business Environment And Audit Framework - More threats - Notes ^{4 / 6}

If the auditor advises on or installs accounting software for a client this will have to be reviewed during the audit.

If the IT system is important to a significant part of the accounting system, the auditor should not design, provide or implement it.

A valuation made by the auditor could have a material effect on the financial statements.

If the valuation requires a degree of judgement and have a material effect on the financial statements, then the auditor should not undertake to provide it

The tax work carried out will be reviewed during the course of the audit and may encourage the auditor to hide mistakes.

If likely to have a material effect on the financial statements, should not be taken on

Be careful, this could be construed as making management decisions.

But, as long as not making decisions it is acceptable to assist client in raising finance or developing corporate strategies

External audit may use the work of internal audit as evidence of some of their conclusions.

So, if significant reliance is to be placed on the work of Internal Audit, this should not be undertaken

If this occurs there is a chance the person could be auditing work or systems they were previously responsible for

So, the employee cannot be involved in the audit until two years have elapsed

The auditor may be too familiar with the client and be unwilling to upset them.

So, the auditor cannot be a director, employee or business partner of client. Cannot be part of team if have been one of these in the last 2 years

An auditor may be unwilling to criticise or upset a family member if they work for the client.

So, no member of the audit team may have a family member or close personal relation in the client firm

If a partner has acted as auditor for a client for too long a period, they may become complacent or over familiar with them.

Safeguard 
If client is listed company engagement partners should act for maximum of 5 yrs with 5 yr break in between rotations. 

A Key audit partner must have a break of 2 yrs after a period of 7 yrs and senior staff on listed audits should also not act for more than 7 yrs. For non-listed clients it is advised that partners act for no longer than 10 years.