The auditor should take several measures to safeguard independence when providing other services to clients. This includes monitoring fees received from clients to reduce dependence, rotating senior staff periodically, not accepting gifts from clients, and not having family or business ties to clients. Independence involves both appearing independent and being independent. Providing additional services can threaten independence through familiarity, self-review, and self-interest. The auditor benefits from additional remuneration and expertise while the client benefits from a wider range of skills without permanent staff costs.

1. Auditing 1
Assignment

2. • Q. Explain the measures that an auditor
should place to safeguard his independence
when providing other services to clients

3. Remember !!
• Independence involves appearing
independent and actually being independent.

4. • Monitoring the fees received from clients in
comparison to the total fees to reduce the
perception of dependence on the client. The
auditor should diversify his clientele to reduce
risk of suffering any substantial business loss
should the client terminate his employment.

5. • Rotating senior audit staff on an engagement after a
fixed period to reduce the threat of too much
familiarity with the client or the perception of such
familiarity.
• Not accepting gifts or hospitality from clients unless
they are considered by partners to be modest.

6. • Not allowing individuals with family or
personal ties to a client to be involved in the
audit of such a client.
• Not engaging in any business or financial
relationship with a client of the auditor.
• In cases where safeguards are not applicable
the auditor should consider resignation.

7. • Using separate teams where additional services
are offered to audit clients to reduce the self
review threat. This occurs when the same
auditor is asked to prepare and audit financial
statements and fails to identify his own
mistakes for fear of financial loss or losing
reputation.

8. • Q. Outline how the auditors independence
may be compromised where the auditor
provides other services to clients:

9. Familiarity threat:- This occurs when an auditor
is too sympathetic or trusting of the client due to
his close relationship with them.

10. • Self review threat:- this occurs when the
auditor has to review work previously
performed..

11. • Self interest threat:- When the client offers
other services to the client the amount of
income gained by the auditor as a result of
such an engagement would substantially
increase. The auditor may fail to raise some
issues for fear of losing the client.

12. • Hospitality provided by the client while the
auditor is in the clients premises may be
viewed as a compromise or might also foster
the growth of personal relationships that may
hinder the audit staff’s objectivity.

13. • Q. Benefits that accrue to the auditor and
benefits that accrue to the client when an
auditor provides other services to his clients.

14. To the auditor:
• The remuneration of the auditor
• Developing a better understanding of the
clients business.
• Training and experience is gained.
• Marketing and reputation.
• Diversification of its services.

15. To the client.
• Audit staff are drawn from a wide range of
expertise
• The cost of employing permanent staff are
avoided
• Specialist skills are employed in the audit.

16. References.
• Study anytime, ACCA paper 8, audit and
assurance 2012.,Kaplan Publishing.