- 6 Marks
Question
Professional accountants face many threats in the performance of their duties that may negatively affect accountants’ objectivity and independence. One of such threats is intimidation threat which may arise from close business relationships, family and personal relationships, and assurance staff members moving to employment with clients as well as actual and threatened litigation.
Required:
Explain FOUR safeguards you will consider to deal with actual and threatened litigation as a professional accountant. (6 marks)
Answer
1. Legal Counsel: Seek advice from legal counsel to understand the implications of the litigation and ensure that the actions taken are within legal boundaries. Legal counsel can provide guidance on how to proceed without compromising the accountant’s independence or objectivity.
2. Independent Review: Arrange for an independent review of the work performed, especially in cases where the threat of litigation may impact the accountant’s judgment. This can provide an additional layer of assurance that the work was conducted in compliance with professional standards.
3. Disclosure to the Audit Committee: Disclose the threat of litigation to the audit committee or equivalent governance body. This allows the committee to take appropriate actions to mitigate the risk and ensure that the situation is handled transparently and ethically.
4. Implementing Strict Policies and Procedures: Establish and enforce strict policies and procedures regarding the handling of litigation threats. This includes maintaining rigorous documentation of all decisions and actions taken, which can serve as evidence of the accountant’s diligence and adherence to ethical standards.
- Tags: Accountants' Independence, Litigation, Professional Ethics, Safeguards
- Level: Level 2
- Series: MAY 2017
- Uploader: Theophilus