| 20 | The audit firm of a Small Entity is not required to comply with APB Ethical Standard 2, paragraph 49 provided that: |
| (a) | it takes appropriate steps to determine that there has been no significant threat to the audit team's integrity, objectivity and independence; and |
| (b) | it discloses the fact that it has applied this Standard in accordance with paragraph 24. |
| 21 | APB Ethical Standard 2, paragraph 49 provides that where a former partner 'is appointed as a director (including as a non-executive director) or to a key management position with an audited entity, having acted as audit engagement partner (or as an engagement quality control reviewer, key partner involved in the audit or a partner in the chain of command) at any time in the two years prior to this appointment, the firm shall resign as auditors. The firm shall not accept re-appointment until a two-year period, commencing when the former partner ceased to have an ability to influence the conduct and outcome of the audit, has elapsed or the former partner ceases employment with the former audited entity, whichever is the sooner'. Such circumstances may create self-interest, familiarity and intimidation threats. |
| 22 | An audit firm takes appropriate steps to determine that there has been no significant threat to the audit team's integrity, objectivity and independence as a result of the former partner's employment by an audited entity that is a Small Entity by: |
| (a) | assessing the significance of the self-interest, familiarity or intimidation threats, having regard to the following factors: |
| the position the individual has taken at the audited entity; |
| the nature and amount of any involvement the individual will have with the audit team or the audit process; |
| the length of time that has passed since the individual was a member of the audit team or firm; and |
| the former position of the individual within the audit team or firm, and |
| (b) | if the threat is other than clearly insignificant, applying alternative procedures such as: |
| considering the appropriateness or necessity of modifying the audit plan for the audit engagement; |
| assigning an audit team to the subsequent audit engagement that is of sufficient experience in relation to the individual who has joined the audited entity; |
| involving an audit partner or senior staff member with appropriate expertise, who was not a member of the audit team, to review the work done or otherwise advise as necessary; or |
| undertaking an engagement quality control review of the audit engagement. |
| 23 | When an audit firm auditing a Small Entity takes advantage of paragraph 20 it discloses the fact that it has applied this Standard in accordance with paragraph 24 and documents the steps that it has taken to comply with this Standard. |
 |
Licence and copyright | © 2018, LexisNexis Group a division of Reed Elsevier (UK) Ltd. All rights reserved. |