1 From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Maldini Co. (1) Length of time the audit engagement partner has been in position (2) Maldini Cos request for advice regarding internal audit (3) Possible provision of internal audit services (4) Basis of fee Which of the following options correctly identifies the valid threats to independence and allocates the threat to the appropriate category? Self-interest Self-review Familiarity 1 only 2 and 3 4 only Self-interest Self-review Familiarity 1 only 2 only 4 only Self-interest Self-review Familiarity 2 only 3 and 4 1 only Self-interest Self-review Familiarity 4 only 3 only 1 only 4 points QUESTION 2 In relation to the audit engagement partner holding the role for eight years and her sons offer of employment with Maldini Co: Which of the following safeguards should be implemented in order to comply with ACCAs Code of Ethics and Conduct? The audit engagement partner should be removed from the audit team An engagement quality control reviewer should be appointed A third party such as a professional body should be consulted on key audit judgements Buffon & Co should resign from the audit 4 points QUESTION 3 In line with ACCAs Code of Ethics and Conduct, which of the following factors must be considered before the internal audit engagement should be accepted? (1) Whether the external audit team have the expertise to carry out the internal audit work (2) If the assignments will relate to the internal controls over financial reporting (3) If management will accept responsibility for implementing appropriate recommendations (4) The probable timescale for the outsourcing of the internal audit function 1, 2 and 3 2 and 3 only 1 and 4 only 1, 3 and 4 4 points QUESTION 4 Which of the following options correctly allocates the auditor characteristics collated by the audit assistant to the role of internal and external auditors? External Internal External Internal 2, 3 and 4 1 only External Internal 1 and 4 2 and 3 External Internal 2 and 4 1 and 3 External Internal 2 only 1, 3 and 4 4 points QUESTION 5 If the internal and external audit assignments are accepted, which of the following statements is TRUE regarding the proposed basis for the fee? As long as the total fee received from Maldini Co is less than 15% of the firms total fee income, then no safeguards are needed The client should be informed that only the internal audit fee can be based on profit after tax The fees should be based on Maldini Cos profit before tax No safeguards can be applied and this basis for fee determination should be rejected