Auditing and Assurance Standards and Guidance

Ethical Standards for Auditors

Ethical Standard(s) for Auditors - applicable in Ireland - applicable for periods beginning before 17 June 2016

ES Provisions available for small entities (Revised 2010)

Exemptions
Management threat - non-audit services
12 When undertaking non-audit services for Small Entity audited entities, the audit firm is not required to adhere to the prohibitions in APB Ethical Standard 5, relating to providing non-audit services that involve the audit firm undertaking part of the role of management, provided that:
 (a) it discusses objectivity and independence issues related to the provision of non-audit services with those charged with governance, confirming that management accept responsibility for any decisions taken; and
 (b) it discloses the fact that it has applied this Standard in accordance with paragraph 24.
13 APB Ethical Standard 5, paragraph 38 provides that where an audit firm provides non-audit services to an audited entity where there is no 'informed management', it is unlikely that any other safeguards can eliminate a management threat or reduce it to an acceptable level with the consequence that such non-audit services may not be provided to that audited entity. This is because the absence of a member of management, who has the authority and capability to:
 dotbullet receive the results of the non-audit services provided by the audit firm; and
 dotbullet make any judgments and decisions that are needed, on the basis of the information provided,
 means that there is an increased management threat since the audit firm will be closer to those decisions and judgments which are properly the responsibility of management and more aligned with the views and interests of management.
14 An audit firm auditing a Small Entity is exempted from the requirements of APB Ethical Standard 5, paragraphs 63(b) (internal audit services), 73(b) (information technology services), 97 (tax services), 131(c) (corporate finance services), 140(b) (transaction related services), 145(a) (restructuring services) and 160(b) (accounting services) in circumstances when there is no 'informed management' as envisioned by APB Ethical Standard 5, provided it discusses objectivity and independence issues related to the provision of non-audit services with those charged with governance, confirming that management accept responsibility for any decisions taken and discloses the fact that it has applied this Standard in accordance with paragraph 24.
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