Tag (SQ): Confidentiality

You are an audit manager in Apex & Co, a firm of Chartered Accountants. You are preparing the engagement letter for the audit of TechTrend, a listed company, for the year ended 31 December 20X8.

TechTrend has grown rapidly over the past few years, and is now one of your firm’s most important clients.

TechTrend has been an audit client for eight years and Apex & Co has provided audit, taxation, and management consultancy advice during this time. The client has been satisfied with the services provided, although the taxation fee for the period to 30 June 20X8 remains unpaid.

Audit personnel available for this year’s audit are most of the staff from last year, including Mr. Thompson, an audit partner, and Mr. Lee, an audit senior. Mr. Thompson has been the audit partner since TechTrend became an audit client. You are aware that Sarah Thompson, the daughter of Mr. Thompson, has recently been appointed the financial director at TechTrend.

To celebrate her new appointment, Sarah has suggested taking all of the audit staff out to an expensive restaurant prior to the start of the audit work for this year.

Required:

(a) Explain the situations where an auditor may disclose confidential information about a client.

(b) Identify and explain the risks to independence arising in carrying out your audit of TechTrend for the year ending 31 December 20X8, and suggest ways of mitigating each of the risks you identify.