Self Review Threat in Auditing Presentation PPT

This is the Presentation PPT on Self - Review Threat in Auditing.

1. Self – Review Threat In Auditing

2.         What is a  SELF-REVIEW   Threat ?

3. What is a SELF REVIEW   THREAT? A self-review threat arises when an auditor is in a position to review and evaluate their own work or the work done by their firm, potentially leading to biased judgment and oversight of errors.

4. Self – review threats in Organization

5. Self – review threats in Organization Accounts preparation Internal audit Tax computations  Valuation services Client staff joins the audit firm

6. Accounting and bookkeeping services

7. Accounting and    bookkeeping   services Providing accounting and bookkeeping services for an audit client might create a self-review threat.  Some of the few examples of accounting and bookkeeping services are as follows Preparing accounting records and financial statements  Recording transactions Payroll services

8. Accounting and    bookkeeping   services Safeguards for non - listed clients: Services must be routine and mechanical Use professionals who are not audit team members Independent review by someone not involved in providing the service Such services cannot be provided to listed clients 

9. Internal  audit services

10. Internal audit services Auditing internal audit work performed by the same firm. The firm should consider: The materiality of the related financial statement amounts. The risk of misstatement of the assertions related to the financial statement amounts. The degree of reliance that the audit team will place on the internal audit service. 

11. Internal audit services Non - listed companies:  Use professionals not part of the audit team. Ensure management takes full responsibility for internal audit activities. Listed companies: Prohibited if it relates to internal controls over financial reporting or material amounts/disclosures.

12. Tax services

13. Tax services Firm evaluating its own work potentially compromising objectivity and independence. Types of services: Tax return preparation Tax calculations Tax planning and advisory Resolution of tax disputes

14. Tax services Safeguards for non – listed clients: Use non – audit team professionals  Independent review Prohibitions for Listed Clients: Cannot prepare tax calculations or act as an advocate in tax disputes.

15. Valuation services

16. Valuation services Providing valuation services that involve significant subjectivity and have a material effect on financial statements. The firm should consider:  The use and purpose of the valuation report, including whether the report will be made public.  The extent of the client’s involvement in determining matters of judgement.  The degree of subjectivity.  Whether the valuation will have a material effect on the financial statements.  The degree of dependence on future events that might create significant volatility in the amounts involved.

17. Valuation services Non-Listed Clients: Prohibited if significant subjectivity and material impact are involved. Listed Clients: Not allowed if it creates a self-review threat.

18. Corporate financial services

19. Corporate financial services Faces the threat of increasing regulatory scrutiny, cybersecurity risks, and market volatility impacting their stability and profitability. Examples of corporate financial services are as follows: Assisting in developing strategies Identifying acquisition targets  Advising on disposals Raising finance

20. Corporate financial services Prohibited services: It involves promoting, dealing in, or underwriting the audit client’s shares. Listed clients: Prohibited if it creates a self-review threat.

21. Client staff  management  

22. Client staff  management   Potentially compromising the auditor's objectivity and impartiality due to their prior involvement with the client's financial statements. Significance of this threat will depend on: position the individual held with the client length of time since the individual left the client role of the audit team member.

23. Client staff  management   Factors to be considered when client joining the audit firm are as follows: Position held Length of time since leaving the client Role in the audit firm

24. conclusion

25. conclusion The self-review threat is a significant concern in the audit industry, as it can undermine the reliability of financial statements and erode stakeholder trust.  Audit firms must implement robust safeguards, such as team separation and independent reviews, to mitigate these risks and uphold the integrity of the audit process. Importance of Independence: Maintaining auditor independence and avoiding self-review threats is crucial for audit integrity. - Safeguards and Prohibitions: Following established safeguards and prohibitions ensures the objectivity and reliability of the audit process.