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John Selwoods audit clinic

In this edition, John considers some perplexing questions on auditor independence that were asked by delegates during the faculty's 2018 autumn roadshows.


I am retiring from my audit practice soon and one of my largest audit clients has offered me a directorship, which I am keen to take. How long do I have to wait after I have left the firm to join them?


This scenario has always been fraught with independence problems for auditors and became even more complicated after the Financial Reporting Council (FRC) issued its Revised Ethical Standard 2016 (ES) for auditors (see ICAEW on auditor independence). So be very careful.

Before dealing with the intricacies, I would like to address your question directly first. Para 2.51 of the ES effectively means that you cannot join an audit client as a director, if you are or have been the audit partner for them for a period of one year from the date when you ceased to be the statutory auditor. And if the audit client is a public interest entity, the waiting period is two years. Restrictions on joining a client were already in the ICAEW Audit Regulations and Guidance for listed entities. This relatively new cooling off period applies for all audits of financial statements periods commencing on or after 17 June 2016.

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