- 1 Marks
AAA – L3 – SA – Q5.2 – Rules of professional conduct
Question
Which of the following statements is INCORRECT?
A An auditor may serve on the board of directors of an audit client.
B An auditor who is an immediate family member of the director of an audit client must not be assigned to the audit team.
C Purchasing goods from an audit client on normal commercial terms does not create a threat to the auditor’s independence.
D An auditor who was recently a director of an audit client must not be assigned to the audit team for that client.
Answer
A
Explanation: Serving on the board of directors of an audit client (A) compromises auditor independence due to conflicts of interest, making this statement incorrect. Options B, C, and D are correct: family members of directors (B) and former directors (D) must not be on the audit team to avoid familiarity threats, and normal commercial purchases (C) do not threaten independence.
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