ACCA Advanced Audit and Assurance P7 (Global) Course Notes by BPP

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1 Members or firms who wish to hold an ACCA practising certificate must hold PII and fidelity guarantee insurance (FGI) in respect of all partners, directors and employees. 2 PII must provide cover in respect of all civil liability incurred in connection with the conduct of the firm's business. FGI must include cover against any acts of fraud or dishonesty by any partner, director or employee in respect of money or goods held in trust by the firm. 1 This term is used to describe the difference between the expectations of those who rely upon audit reports concerning audit work performed and actual work performed.

Do they think they will get a reasonable fee for a quality job? Do they want the work? 2 The risk attaching to the client must be considered. The audit firm would wish to consider the following: (1) How has the approach arisen? (2) Why has the firm been asked? Is it due to their reputation, a recommendation from a mutual contact or is the company unhappy with the current fees? (3) What it is being asked to do? (4) What is the risk in getting involved? (5) Can the firm afford to spend time on the proposal?

5 Limited Liability Partnerships (LLPs) would permit the partners not to be personally liable for the liabilities of the firm. Legislation was enacted in the UK in April 2001 allowing LLPs to be set up. Ernst & Young were the first firm to avail of the legislation. 6 Capping liability would allow auditors to limit the amount of their liability for an individual audit. The maximum amount could be based on some multiple of the audit fee. This is not currently permitted for audit work in the UK although there are government proposals to introduce a cap.