Page 32 - AAA Integrated Workbook STUDENT S18-J19

Chapter 3

3.2 Assuming management responsibilities

A firm must not assume management responsibilities as part of an assurance
engagement or for an audit client.

Activities considered management responsibility:

 Setting policies and strategic direction.

 Hiring or dismissing employees.

 Directing and taking responsibility for employee’s actions.

 Authorising transactions.

 Deciding which recommendations to implement.

 Taking responsibility for the preparation and fair presentation of the financial
statements.

 Taking responsibility for designing, implementing and maintaining internal
controls

The firm should take steps to ensure that client management make all judgments and
decisions.

Administrative services which are routine and do not involve professional judgment
are generally not considered a threat. However, the significance of any threat created
should be evaluated and safeguards applied if necessary.

The auditor must ensure informed management is in place. This means the auditor
believes management is capable of making decisions for the company based on the
information available (rather than based solely on the auditor's advice).

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