John Selwood's audit clinic
Faculty members attending the spring roadshow brought some interesting questions relating to auditor independence.
Sometimes, when an audit client has a staff canteen or a dining room, the audit staff are invited to use these facilities at lunch time – free of charge. Previously, I have never considered this to be an issue for auditor independence. Do the requirements of the new FRC Ethical Standard change this? Should I be requiring that the audit team refuse this hospitality?
You are referring to the new requirement that the audit team (plus other covered persons or partners, of
course) cannot accept hospitality unless an ‘objective, reasonable and informed third party’ would construe the value to be trivial or inconsequential.
I find yours a particularly interesting question, because I think that this is such a grey area. The FRC Revised
Ethical Standard 2016 (FRC ES) does not define ‘hospitality’, ‘trivial’ or ‘inconsequential’. Also, I suspect that some audit firms have not given this aspect of hospitality much thought, and those that have been thinking about
it do not seem to be reaching any sort of consensus.
Find out more
Members of the Audit and Assurance Faculty, subscribers to Faculties Online and IAAE
Read the full article: John Selwood's audit clinic