A specialist practitioner has alerted accountants to the fact there is no specified revenue percentage threshold from a single source of referrals that a practice partner has to avoid in order to satisfy the amended auditor independence standards.
Speaking during the most recent Acccurium technical webinar, ASF Audits head of education Shelley Banton noted: “There isn’t [an acceptable revenue percentage magic number] and in the code it doesn’t mention any particular percentage either.
“I know some firms [are using] 20 per cent as a litmus test, others are thinking it may be closer to 50 per cent, [but] what the standard … simply says is that there may be a self-interest or intimidation threat if fees are a large proportion of the revenue of one partner or one office of the firm.”
According to Banton, other factors such as the charging of an appropriate fee for the audit can compromise a practitioner’s ability to comply with the amended standard.
“Under the standard [if you are charging a low fee] that’s actually listed as an independence threat because it would be difficult to perform the engagement in line with professional standards if the fee was that low,” she said.
Other situations she identified as having the potential to cause problems with regard to audit independence for accountants are where the client is a slow payer or if the client provides entertainment for the practitioner.
“What about if you’ve got a slow payer? How is that going to [potentially] create independence threats if you’re waiting for somebody to pay when you’re still trying to get work out the door at the same time?” she said.
“So all of this needs to be considered in the light of not only this referral source issue, but other independence issues as well.”
