(a) Impact of the provided information and influence on decision to accept nomination

1. Volta Investigations as a major service provider:
   • Impact: Volta Investigations provides significant IT and fraud consultancy services to your firm, creating a potential self-interest and familiarity threat to independence under the IESBA Code of Ethics. The financial reliance on Volta could compromise objectivity, especially if audit findings conflict with their consultancy work.
   • Influence: This relationship significantly increases the risk of accepting the nomination, as maintaining independence is critical. Safeguards, such as segregating audit and consultancy teams or declining non-audit services, would be needed, but the extent of reliance may make independence difficult to achieve.
2. Acrimonious parting with previous auditors and withheld fees:
   • Impact: The contentious departure and fee dispute suggest potential issues with management integrity or disputes over audit quality. This raises a red flag about Volta’s attitude towards audit processes and compliance, increasing the risk of disagreements or pressure on the new auditor.
   • Influence: This factor weighs heavily against acceptance, as it indicates a high-risk client. Further investigation into the reasons for the dispute and the competence of the previous auditors is necessary to assess whether the firm can maintain professional skepticism and avoid similar conflicts.
3. Hostile takeover by Tamale Investigations Group, an existing audit client:
   • Impact: Auditing both Volta and Tamale, especially during a hostile takeover, creates a conflict of interest, as the firm may have access to sensitive information from both parties, compromising confidentiality and independence. This violates the IESBA Code’s requirement to avoid conflicts between clients.
   • Influence: This is a significant barrier to acceptance, as the conflict of interest is likely insurmountable without declining one of the clients. The firm must prioritize ethical compliance, making it highly unlikely to accept Volta’s nomination while auditing Tamale.

Conclusion: The combination of these factors—reliance on Volta’s services, their dispute with prior auditors, and the conflict with Tamale—presents substantial ethical and professional risks, strongly suggesting that the firm should decline the nomination unless robust safeguards can eliminate these threats.

(b) Other factors to consider in accepting Volta Investigations as a client

1. Client Integrity and Reputation: Investigate Volta’s management integrity, business practices, and any history of regulatory or legal issues to assess the risk of association with a potentially unethical client.
2. Financial Stability: Evaluate Volta’s financial position, especially given the hostile takeover, to determine the risk of insolvency or going concern issues, which could complicate the audit.
3. Complexity of Operations: Assess the complexity of Volta’s investigative operations, including IT and fraud consultancy, to ensure the firm has the technical expertise and resources to conduct a high-quality audit.
4. Fee Dependence: Consider the proportion of total fees from Volta (audit and consultancy) relative to the firm’s income, as excessive dependence could impair independence.
5. Litigation Risk: Evaluate the likelihood of litigation or disputes, given Volta’s history with prior auditors and the takeover, to assess the firm’s exposure to professional liability.

(c) Steps to take if the nomination is accepted

1. Obtain Professional Clearance: Contact the previous auditors to understand the reasons for their departure, any disagreements, or issues with management integrity, ensuring no professional reasons preclude acceptance (per IESBA and ISOM 1 requirements).
2. Perform Client Due Diligence: Conduct background checks on Volta’s management, financial stability, and business practices to confirm the acceptability of the client under ISOM 1’s client acceptance policies.
3. Implement Safeguards for Independence: Establish safeguards, such as separate teams for audit and consultancy services, or decline non-audit services to mitigate self-interest and familiarity threats. Resolve the conflict with Tamale by declining one client or obtaining informed consent from both, though this is unlikely to be feasible.
4. Engage in Formal Acceptance Procedures: Document the acceptance decision, including risk assessments and safeguards, in accordance with ISOM 1. Obtain partner approval and sign an engagement letter outlining the scope, responsibilities, and fees.
5. Plan the Audit: Develop an audit plan considering Volta’s high-risk profile, including enhanced procedures for areas like the takeover, IT systems, and fraud-related transactions, ensuring compliance with ISA 220 and other standards.