APESB amends code due to auditor referral risks

The Accounting Professional Ethical and Standards Board (APESB) has amended its professional code to address a concern relating to auditor referrals, particularly in the self-managed super fund (SMSF) sector.

Essentially the concern arises where a firm is receiving a large proportion of its total fees from a single referral source. This creates a potential self-interest conflict due to an over reliance on that referral source.

The existing APES 110 Code of Ethics for Professional Accountants has been updated because APESB has identified that this is a risk in the SMSF sector and “it is likely to be relevant in other sectors as well”.

The concerns relate to circumstances where auditors may be receiving multiple referrals from a single source, an APESB statement said.

“In certain circumstances another party or firm may refer multiple audit clients to a firm,” the new passage reads.

“In these circumstances, when the total fees in respect of multiple audit clients referred from one source represent a large proportion of the total fees of the firm expressing the audit opinions, the dependence on that source and concern about losing those clients creates a self-interest or intimidation threat.”

APESB said the significance of the threat should be evaluated and safeguards applied when necessary, to eliminate the threat or reduce it to an acceptable level.

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