- 4 Marks
Question
Kankam and Partners is an audit firm providing audit services to two competing beer producers: “Pashew” and “Agyimu” breweries. The two companies run neck to neck in terms of market share, with “Pashew” holding 45% and “Agyimu” holding 40%. Advertisements run by the companies give the impression of stiff competition between the two and public perception is that they are enemies.
Required: As an Audit Manager of Kankam and Partners, discuss TWO (2) measures your firm should put in place to avoid disclosing confidential matters of the companies to each other.
Answer
- Consideration of Accepting Engagements:
- Measure: The firm should give careful consideration to whether or not it is appropriate to accept an assurance engagement from a new client that is in direct competition with an existing client. It may be appropriate to decline the offer from the potential new client to avoid any conflict of interest.
- Chinese Walls and Separate Teams:
- Measure: The firm should implement procedures to prevent access to confidential information, such as creating ‘Chinese walls,’ which involve the physical separation of the audit teams. This also includes ensuring different members of staff are used on the two engagements to maintain confidentiality.
- Tags: Audit Safeguards, Confidentiality, Conflict of Interest
- Level: Level 3
- Series: NOV 2023
- Uploader: Dotse