Alex Anderson LLP is a global firm of chartered accountants.
It has a reputation for excellence in the banking and insurance industry and has been invited to accept engagements by various institutions as follows.
- The audit of Your Staffordshire Savings plc, the leading building society in the UK. 40% of Alex Anderson LLP staff members with mortgages have mortgaged their homes with Your Staffordshire Savings plc.
- The audit of Your Money Ltd, a large business which banks cheques and cash items for the general public and advances loans. A member of the proposed audit team was impressed by the loan rate offered during the tendering process and took out a loan with Your Money Ltd to buy a car.
Which, if any, of the above companies present a major threat to the independence of Alex Anderson LLP, if the engagement were to be accepted?
Select ONE answer:
- A Your Staffordshire Savings plc and Your Money Ltd
- Your Staffordshire Savings plc only
- Your Money Ltd only
- Neither Your Staffordshire Savings plc nor Your Money Ltd
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
- Not correct
- Not correct
- Correct – Your Money Ltd is a threat as it is implied that an audit team member took advantage of the loan rate mentioned in the audit tendering process. Your Staffordshire Savings plc is not a threat as it is acceptable for staff to have mortgages on commercial terms with an audit client who is a mortgage provider, especially if it is the leading building society.
- Not correct
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