A bank pays an audit firm ₦300 million a year, which is a third of the firm's income. The bank's managing director offers the engagement partner a free holiday. The same firm designed the bank's payment system and prepares its payroll. None of these facts proves that the audit is wrong, but together they make it very hard to believe that the firm could stand up to the managing director.
Independence is the quality that gives an audit report its value, and this topic sets out every common way in which it is threatened and what the Code says to do about each.
It covers actual and perceived independence, then fees, family and personal relationships, business relationships, financial interests, loans, employment, long association, non-assurance services, gifts and hospitality, and litigation. The previous topic gave the five threats and the safeguard method. This topic applies them.
In 30 seconds
Two tests: the auditor must be independent in fact and must be seen to be independent. Fees: a presumed self-interest threat where fees from a public interest entity exceed 15% of the firm's income for two years (the Institute of Chartered Accountants of Nigeria (ICAN) Code uses 25%); contingent fees are not allowed. Financial interests and close business relationships: generally prohibited. Rotation: key audit partners rotate after seven years.
Non-assurance services: never take management responsibility; for public interest entities no accounting, payroll or valuation of material items. Gifts: only if trivial and inconsequential.
Key terms in plain English
| Term | What it means |
|---|---|
| Independence in fact | Freedom from influence in forming the opinion |
| Independence in appearance | Being seen by others to be independent |
| Public interest entity | A listed or public company or other entity the law treats as of public interest |
| Contingent fee | A fee that depends on the result of the work |
| Key audit partner | The engagement partner, the quality review partner or a significant component partner |
| Cooling-off period | The time a rotated partner must stay off the engagement |
| Management responsibility | Taking decisions that belong to the client's management |
| Inducement | A gift or hospitality offered to gain influence |
Syllabus check
This topic is in syllabus area E, professional ethics and public interest (15% of marks). It covers:
- the ethical threats to independence and the safeguards
- the ethical issues under the IFAC and ICAN codes
- the importance of professional ethics
CAMA 2020 and independence
The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 403 | Qualification and disqualification of auditors: officers, their partners and employees, bodies corporate, debtors over ₦500,000, long-serving record keepers | The law bars the most serious connections outright |
| s. 404(2) and (7) | Auditor reports to the audit committee of a public company; the committee reviews the audit and recommends appointment, removal and fees | A safeguard: oversight by those charged with governance |
| s. 406 | Improper influence on the conduct of audit | The law prohibits pressure on the auditor |
The rules in more depth
Actual and perceived independence
For an audit or assurance report to be worth anything the practitioner must be independent in fact, with an opinion that nobody else, and in particular the client's management, has influenced, and must also be seen to be independent. Independence is a matter of public confidence in the audit. A threat to independence is any situation that may damage independence or objectivity.
The conceptual framework from the previous topic applies, and the Code gives specific guidance on ten main areas:
- fees and pricing;
- family and personal relationships;
- close business relationships;
- financial interests;
- loans and guarantees;
- employment or former employment with assurance clients;
- long association of senior personnel with assurance clients;
- provision of non-audit services;
- gifts and hospitality; and
- actual and threatened litigation.
Fees and pricing
Relative size of fees. If the fees from one assurance client are a large share of the firm's total fees, dependence on that client and worry about losing it create a self-interest or intimidation threat.
Safeguards include discussing the extent and nature of fees with the audit committee or other suitable persons at the client, reducing dependency, for instance by refusing lucrative non-audit work, having an external quality management review, and consulting a third party such as ICAN or another accountant.
For public interest entities, which include all listed or public companies, the International Federation of Accountants (IFAC) Code presumes a self-interest threat when total fees from the client and its related entities are 15% of the practice's income for two consecutive years. ICAN's Code uses the higher threshold of 25%.
The firm must tell those charged with governance when the threshold is passed and must consider other safeguards, such as a post-issuance review, and a pre-issuance review if the fees significantly exceed the threshold.
Overdue fees. Fees that stay unpaid for a long time create a self-interest threat, because the firm is in effect lending to the client. This is certainly so if a significant part is unpaid when the next report is issued. The Code recommends that the fees be paid before the report is issued.
Other safeguards are partial payment and a review by an additional accountant who was not on the engagement.
Pricing. Winning work at a significantly lower fee than the previous firm or other firms quoted (low-balling) creates a self-interest threat. It is acceptable only if the firm shows it has enough time and qualified staff and is following all assurance standards and quality procedures.
Contingent fees. A contingent fee is one fixed on a pre-determined basis tied to the outcome of a transaction or of the work, such as "no win, no fee", or a percentage of the money saved or made for the client. It creates both self-interest and advocacy threats that cannot be reduced enough, so the Code does not allow it.
An example is a fee for an assurance report supporting a loan application that is payable only if the loan is granted, or a fee for tax work calculated as a percentage of the tax saved. Fees should be set by the experience of the people doing the work and the time they spend.
Family and personal relationships
A family or personal link between a member of the assurance team and a director, officer or certain employees of the client may create self-interest, familiarity or intimidation threats. The significance depends on the member's responsibilities on the engagement, the closeness of the relationship and the role of the relative at the client.
A partner whose wife is finance director of the client is a far bigger problem than an audit junior whose sister is the receivables ledger clerk.
- Immediate family (spouse or dependant) who is a director, officer or employee in a position to exercise significant influence over the subject matter: the only suitable safeguard is to remove the individual from the team. If all the partners are close, the safe course may be not to take the client at all.
- Close family (parent, non-dependent child, brother, sister) in the same position: remove the individual from the team, or, where possible, arrange the work so that the member does not deal with matters the relative is responsible for. The junior whose sister is the ledger clerk would not be given receivables.
- Other relationships: the firm must consider any other personal relationship that could bear on independence.
A past examination had a partner who proposed that his daughter join the audit team. No rule forbids it, but the firm should consider whether two or more family members on the same team harm perceived independence, especially if one is senior to the other and could exert undue influence. It is prudent to keep one of them off the team.
Close business relationships
A commercial or common financial interest between the firm, or a team member, and the client or its management creates self-interest or intimidation threats. Examples are a financial interest in a joint venture with the client or its senior management, arrangements to combine services or products and market them with reference to both parties, and the firm acting as distributor or marketer of the client's products or the reverse.
If the relationship is the firm's, it is prohibited unless the financial interest is immaterial and the relationship clearly insignificant to the firm. The only courses are to end the relationship, reduce it until it is immaterial and insignificant, or refuse the engagement. If it is a team member's, the only suitable safeguard is to remove that person from the team.
Buying goods and services from a client in the normal course of business and on arm's length terms does not usually create a threat. The nature or number of transactions might, in which case safeguards are to cut them or remove the individual from the team.
A new team member who bought from the client in the past on normal terms causes no problem, but one who plans to keep buying heavily should be asked to stop or be taken off the team.
Financial interests
A financial interest exists where shares or debt instruments are held directly or indirectly. A direct interest is held by the individual, the firm or a trust they control. An indirect interest is held through a trust they do not control. Neither a team member nor his immediate family, nor the firm, may hold a direct financial interest or a material indirect financial interest in an audit client.
The safeguards are to dispose of the direct interest, to dispose of the indirect interest or reduce it until it is no longer material, to remove the individual from the team, or to resign from the audit. If the holding is acquired as a gift or by inheritance, it must be disposed of as soon as practicable or the person removed from the team.
Loans and guarantees
If the client is a bank or similar institution, a loan made to the firm or to a team member on normal terms creates no threat. If the client is not a bank, the self-interest threat is so great that no safeguard can reduce it, unless the loan is immaterial to both the firm or member and the client.
Employment and former employment
A former team member joins the client. The threats (self-interest, familiarity, intimidation) depend on the person's seniority on the team, the post taken at the client, how much future contact he will have with the team and how long ago he left, and are greatest if strong personal or financial links remain. The Code requires that:
- the person is not entitled to any benefit or payment from the firm, except under fixed, pre-determined arrangements;
- any amount owed to him, for example to a former partner, is not so large that it threatens independence;
- he no longer takes part, or appears to take part, in the firm's business; and
- if a former key audit partner joins a public interest entity audit client, independence is deemed compromised unless, after he ceased to be key audit partner, the entity has issued audited financial statements covering at least twelve months and he was not a member of the team on those statements.
Other safeguards are changing the audit plan to add work in the area he will be involved in, using a team strong enough not to be intimidated by him, and an independent review of his past work. A team member who knows he will join the client may be reluctant to upset his future employer.
The firm needs policies that require staff to tell the firm when they begin serious negotiations with a client, must remove the person from the team. Must have a suitable reviewer look at any significant judgements he made. A former client employee joins the team may report on work he did and be reluctant to criticise former colleagues.
A person who, during the period covered by the report, was a director, officer or employee in a position to exert significant influence over the subject matter must not be assigned to the team. If the service was earlier, the threat depends on the time elapsed, his position at the client and his role on the team. An additional accountant should review his work.
Long association of senior personnel
Using the same senior people for a long time creates a familiarity threat. The level depends on how long the person has been on the team, his role, the structure of the firm and the nature of the engagement. Safeguards are rotating senior staff, such as the engagement partner, a review by an additional accountant and independent quality management reviews.
For audits of public interest entities a key audit partner, which means the engagement partner, the quality review partner or the engagement partner of a significant component, must be rotated after no more than seven years. The time before he may return is the cooling-off period:
| Role over the seven years | Cooling-off period |
|---|---|
| Engagement partner | Five consecutive years |
| Engagement quality management reviewer | Three consecutive years |
| Key audit partner in any other capacity | Two consecutive years |
In exceptional cases, such as the serious illness of the incoming partner, the seven years may be extended by up to one year, to eight in all. When a client becomes a public interest entity, the person may serve a further seven years less the time already served as key audit partner. If he had served six years or more, he may serve a further two years.
If the firm is so small that rotation is not practicable, another safeguard such as a review by an additional accountant is applied.
Provision of non-assurance services
Doing a lot of non-audit work for an audit client can threaten independence in two ways: the income can make the firm economically dependent on the client (self-interest), and the audit staff may have to audit work done by colleagues in the same firm (self-review).
A firm must never take management responsibility, which includes setting policies and strategic direction, hiring or dismissing employees, directing and taking responsibility for employees' actions, authorising transactions, controlling or managing bank accounts or investments, deciding which of the firm's recommendations to implement, reporting to those charged with governance on behalf of management, and taking responsibility for preparing the financial statements or for designing, monitoring and maintaining internal controls.
To avoid it, the firm makes sure the client designates a person to be responsible for all decisions and to oversee the services.
| Service | Threat | Rule and safeguards |
|---|---|---|
| Preparing accounting records and financial statements | Significant self-review | Never decide accounting policies, change journal entries without approval, authorise transactions or prepare source data. Advice on accounting principles and presentation during the audit is normal. For public interest entities, no accounting or book-keeping, including payroll, and no preparation of financial statements. For other clients, routine or mechanical work only, with safeguards: not done by the audit team, no management decisions, source data from the client, assumptions approved by the client, client approval of changes. |
| Valuation services | Self-review | For non-public interest clients, not where the matter is material and very subjective. For public interest entities, not where material. Otherwise: client takes responsibility, review by an additional accountant, client approves assumptions and methods, valuers not on the audit. |
| Tax return preparation | Low | Acceptable if management takes responsibility for the returns and judgements. |
| Tax calculations for accounting entries | Self-review | Non-public interest entities with safeguards (separate team, partner review, external tax adviser). Prohibited for public interest entities. |
| Tax planning and advice | Self-review, advocacy | Acceptable if clearly supported by tax authority or other precedent, with safeguards (people not on the audit team, a tax professional who was not involved advises the team, external advice, pre-clearance). Not acceptable if its effectiveness depends on a particular accounting treatment, if the team doubts the treatment or if consequences are material. |
| Tax dispute assistance | Advocacy | Not where the firm acts as advocate and the effect on the statements is material. Otherwise the same safeguards as above. |
| Internal audit services | Self-review | Client responsible for the internal audit activities and the controls, client and audit committee approve scope, risk and frequency, client evaluates recommendations and decides, client assesses the work, findings go to the audit committee. Consider using people not on the audit. |
| IT systems services (financial information systems) | Self-review | Prohibited for public interest entities. For others: client acknowledges responsibility for controls, designates a competent senior employee, makes all management decisions, evaluates the design and result, and operates the system. |
| Temporary staff assignments | Self-review | Only for a short period, no prohibited services, no management responsibility, client directs and supervises. Loaned staff have no later audit responsibility for those areas, or stay off the team, with an additional review. |
| Litigation support (expert witness, damages, document retrieval) | Self-review, advocacy | Not done by the assurance team, no management decisions, use of independent experts. |
| Legal services | Self-review, advocacy | Use people outside the audit, with a review. Acting for a client in a dispute whose amount is material to the statements must not be taken on. |
| Recruitment of senior management | Self-interest, familiarity, intimidation | Client makes the hiring decision, and the work is done by people outside the audit team. The firm does not negotiate for the client and does not search for candidates or check references for directors or senior staff with significant influence over the statements. |
| Corporate finance | Advocacy, self-review | Never promote, deal in or underwrite an audit client's shares. Otherwise no management decisions, a review, and separate teams. |
Inducements, gifts and hospitality
Accepting gifts or hospitality from an assurance client may create self-interest, familiarity and intimidation threats. The Code says an inducement may be accepted only where its value is trivial and inconsequential. Offers to immediate or close family members by existing or prospective clients must also be watched, because they may be meant to influence the member improperly.
In the May 2026 examination the managing director of Royal Bank Plc offered the audit engagement partner a free holiday. That is a self-interest and familiarity threat to independence and objectivity, and a perceived loss of independence.
The safeguards are to decline the offer, report it to the firm's ethics partner, reinforce the firm's independence policy, involve the audit committee, and, if needed, reassign or rotate the engagement partner in line with the rules.
Actual and threatened litigation
If the client or some of its shareholders actually sue, or threaten to sue, the firm over something it did or did not do, a self-interest or intimidation threat arises. Its significance depends on how material the case is and whether it concerns an earlier assurance engagement.
Safeguards are to remove the person involved from the team and to appoint an additional accountant to review the work and judge the nature of the litigation threat.
A summary table: situation, threat and usual response
| Situation | Main threat | Usual response |
|---|---|---|
| One client gives a large share of fees | Self-interest, intimidation | Tell those charged with governance, reduce dependence, extra review |
| Fees unpaid for a long time | Self-interest | Require payment before the report is issued |
| Fee depends on the outcome | Self-interest, advocacy | Refuse |
| Partner's spouse is finance director of the client | Self-interest, familiarity, intimidation | Remove from the team; if all partners are close, decline the client |
| Joint venture with the client | Self-interest, intimidation | End it, cut it to an immaterial level or refuse the audit |
| Team member holds shares in the client | Self-interest | Dispose of them, leave the team or resign from the audit |
| Loan from a client that is not a bank | Self-interest | No safeguard works unless the loan is immaterial to both sides |
| Team member about to join the client | Self-interest | Remove from the team and review his past judgements |
| Same partner for many years | Familiarity | Rotate, with a cooling-off period |
| Firm prepared the accounts | Self-review | Separate team, client approval; banned for public interest entities |
| Gift or hospitality | Self-interest, familiarity, intimidation | Decline unless trivial and inconsequential |
| Client threatens to sue the firm | Self-interest, intimidation | Remove the person involved and add a reviewer |
How perceived independence is judged
Independence in appearance is judged from the outside. The test is whether a reasonable and informed third party, aware of all the facts, would conclude that the firm's objectivity had been compromised. This is why a firm cannot defend itself by saying that, in truth, its judgement was not affected.
A bank customer who reads that the audit partner took a holiday from the bank's managing director will doubt the audit regardless of what the partner says. The firm must therefore avoid the appearance of a problem as well as the problem, and must act early.
Independence and those charged with governance
A firm communicates with those charged with governance, in a public company the audit committee, about independence. The firm tells them about relationships that may bear on independence, about the fees for audit and for other services, and about the safeguards it has applied.
This lets the committee judge whether the firm's independence is intact and whether to recommend its re-appointment under section 404(7)(e) of the Companies and Allied Matters Act 2020 (CAMA 2020). The committee also approves non-audit services, which is itself a safeguard, because management cannot buy the auditor's goodwill with extra work if the committee must approve it.
Keeping the firm's records on independence
A firm keeps its independence under review throughout the engagement and not only at the start. It normally requires every member of the team to confirm in writing, at the start of the engagement and each year, that they have no prohibited financial interest or relationship.
It keeps a list of audit clients so staff can check their investments against it, records every offer of a gift, reports any threat to the ethics partner, and documents the conclusion reached and the safeguards applied. These records are the proof, if the firm is ever challenged by the regulator or in court, that it considered its independence and acted properly.
Integrity and objectivity within independence
Independence is the state; integrity and objectivity are the personal qualities that produce it. An auditor of integrity does not hide an uncomfortable finding, and an objective auditor weighs the evidence without regard to the client's wishes. A rule on independence can only prevent the situations that tempt an auditor to compromise these qualities.
If the person lacks them, no rule will make the audit sound, which is why firms care about the character of the people they recruit and promote.
Points that are often confused
- Advice is not management. Giving advice on accounting principles and presentation during the audit is part of the normal audit. Making the decision for the client is not. The test is who decides.
- Disclosure is not a cure. Telling the client or the audit committee about a gift, a relationship or a fee dependence is a safeguard. But it does not make a prohibited arrangement acceptable. A direct financial interest remains prohibited even if everyone knows about it.
- Family on the team is not banned. The rule bites where a family member of a team member is in a position to influence the subject matter of the engagement, or where two relatives on the same team could affect perceived independence.
- Public interest entities are treated more strictly. The same service may be acceptable with safeguards for a private company and prohibited for a listed company, as with payroll, valuations of material items and the design of financial information systems.
- The ICAN figure differs from the IFAC figure for fees. Use 15% for the International Federation of Accountants Code and 25% for ICAN, and say which you are applying.
- Rotation protects familiarity, not self-interest. A long-serving partner is moved to cure the familiarity threat. A fee dependence threat needs a different answer, such as disclosure and review.
Worked examples
Example 1: fee dependence. A firm earns ₦300 million a year from a listed company and its subsidiaries. The firm's total income is ₦1 billion, and the share has been the same for two years.
- ₦300 million is 30% of ₦1 billion, above both 15% (IFAC) and 25% (ICAN).
- There is a presumed self-interest threat for a public interest entity.
- The firm tells those charged with governance and considers a pre-issuance review and reducing dependence.
Example 2: the Happy Days proposals. The managing director of a race-course hospitality company offers (a) two free tickets to a major event to every audit team member, (b) a six-month secondment of last year's audit senior, and (c) internal audit services from the firm.
- (a) The tickets are valuable, not trivial: decline, because of self-interest, familiarity and intimidation threats.
- (b) A short secondment is allowed only if the senior takes no management responsibility, the client directs and supervises. He has no later audit role in the areas he worked on. Here the current audit has not started, so keep him off this year's audit team and review any work involving him.
- (c) Internal audit creates a self-review threat. For a client that is not a public interest entity, it is acceptable only with the safeguards: the client is responsible, the audit committee approves scope, and findings go to the committee. Use staff who are not on the audit.
Example 3: a contingent fee. A firm is offered 5% of the tax saved for a tax review of an audit client.
- The fee depends on the outcome: a contingent fee.
- It creates self-interest and advocacy threats that cannot be reduced, so it must be refused.
Example 4: rotation. An engagement partner has led the audit of a listed company for seven years.
- The seven-year limit for key audit partners has been reached.
- He must rotate off and may return only after five consecutive years.
Example 5: a loan. An audit manager takes a ₦5 million personal loan from an audit client that is a manufacturing company, on a friendly basis and at a low rate.
- The client is not a bank, so the loan is not made on ordinary commercial terms by a lender in the business of lending.
- The self-interest threat is so great that no safeguard can reduce it, unless the loan is immaterial to both the manager and the client.
- The manager should repay or leave the team, and the firm should record the decision.
Example 6: a joint venture. An audit firm and its audit client start a joint training programme, and both firms' names appear on the brochure.
- The arrangement combines services and markets them with reference to both parties: a close business relationship.
- Unless the financial interest is immaterial and the relationship clearly insignificant, the relationship is prohibited.
- The firm must end it, cut it to an immaterial level or refuse the audit.
Example 7: payroll for a listed client. A listed company asks its auditors to run its payroll to save cost.
- Payroll is an accounting and book-keeping service, with a self-review threat.
- The client is a public interest entity, so the service is prohibited.
- The firm must decline, or resign from the audit and accept the payroll work only if the rules allow.
How to score full marks
- For each proposal say: acceptable or not, the threat, and the safeguard.
- Give the figures: 15% (ICAN 25%) fees, seven years, cooling-off periods.
- Separate public interest entities from other clients.
- Use "trivial and inconsequential" for gifts.
Common mistakes in the exam
- Accepting gifts as long as they are disclosed.
- Allowing contingent fees with safeguards.
- Letting the audit firm take management decisions in non-audit work.
- Forgetting that some services are banned outright for public interest entities.
Quick revision
- Independent in fact and in appearance.
- Fees: 15% (ICAN 25%) for two years; no contingent fees.
- No direct or material indirect financial interest.
- Rotate key audit partners after seven years.
- Gifts: trivial and inconsequential only.
- No management responsibility in non-audit work.
Practice questions
Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.
Question 1. The IFAC Code presumes a self-interest threat for a public interest entity when fees from the client exceed what share of the firm's income for two consecutive years?
- 5%
- 10%
- 15%
- 50%
Show the answer
C. 15%; the ICAN Code uses 25%.
Question 2. A contingent fee for an audit client is:
- Allowed with safeguards
- Not allowed
- Allowed for small clients
- Allowed if disclosed
Show the answer
B. It creates threats that cannot be reduced enough.
Question 3. A key audit partner of a public interest entity must rotate after no more than:
- Three years
- Five years
- Seven years
- Ten years
Show the answer
C. Seven years.
Question 4. The cooling-off period for an engagement partner is:
- Two years
- Three years
- Five consecutive years
- Seven years
Show the answer
C. Five consecutive years.
Question 5. A team member holds shares worth a material amount in an audit client. The right response is to:
- Disclose them
- Dispose of them or leave the team
- Keep them
- Vote them
Show the answer
B. Direct and material indirect interests are not allowed.
Question 6. A gift from a client may be accepted only if its value is:
- Under ₦50,000
- Trivial and inconsequential
- Approved by the partner
- Declared
Show the answer
B. The test is trivial and inconsequential.
Question 7. For a public interest entity the firm may NOT provide:
- Tax return preparation
- Payroll and accounting services
- Advice on accounting principles during the audit
- An audit
Show the answer
B. Accounting, book-keeping and payroll are prohibited.
Question 8. If a former partner joins a public interest entity client, independence is deemed compromised unless:
- The client pays a fee
- The entity issued audited statements covering at least twelve months after he ceased to be key audit partner, without his involvement
- He resigns from ICAN
- The firm resigns
Show the answer
B. Twelve months of audited statements without him.
Question 9. A firm designs the client's financial information system. For a public interest entity this is:
- Allowed
- Prohibited
- Allowed with a fee cap
- Allowed if the client agrees
Show the answer
B. Prohibited for public interest entities.
Question 10. Overdue fees from a client create a:
- Self-interest threat
- Advocacy threat
- Familiarity threat only
- No threat
Show the answer
A. The firm is in effect lending to the client.
Question 11 (10 marks). Discuss the threats to independence that arise from fees and set out the safeguards. (8 marks)
Question 12 (10 marks). The managing director of an audit client offers the firm (a) free tickets to the audit team, (b) a six-month secondment of last year's audit senior and (c) internal audit services. Say which are acceptable and what safeguards are needed. (8 marks)
Question 13 (10 marks). Explain the rules on rotation of key audit partners of public interest entities. (6 marks)
Model answers
Show the model answer to Question 11
Relative size of fees: dependence creates self-interest or intimidation threats; for public interest entities presumed at 15% for two years (25% under ICAN). Safeguards: disclose to those charged with governance, reduce dependency, external quality review, consult ICAN or another accountant, pre- and post-issuance review. (3) Overdue fees: self-interest; require payment before the report, partial payment, additional reviewer. (2) Low-balling: acceptable only with proper time and staff and compliance with standards. (1.5) Contingent fees: prohibited. (1.5)
Show the model answer to Question 12
(a) Decline: valuable tickets create self-interest, familiarity and intimidation threats; only trivial and inconsequential inducements are acceptable. (2) (b) Possible if short, no management responsibility, client directs the senior; keep him off the current audit and review related work. (3) (c) Self-review threat; acceptable for a non-public interest entity only with the client taking responsibility, the audit committee approving scope, findings reported to it, and separate staff. (3)
Show the model answer to Question 13
Key audit partners (engagement partner, quality review partner, engagement partner of a significant component) rotate after no more than seven years. (2) Cooling-off: five years for the engagement partner, three for the quality management reviewer, two for others. (2) Extension up to one year in exceptional cases, such as serious illness of the incoming partner.
(1) For a client that becomes a public interest entity, the time served counts against seven years; six years or more allows two more years. (1)
Pathfinder on Independence, objectivity and integrity of the auditor
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Revise first: Inducements, gifts and hospitality
Source: ICAN Pathfinder, Audit, Assurance and Forensics. Diets covered: May 2026 and November 2025.
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