AUE3761 Test 1 – April 2026 based on the case study:
1. Ethical concerns and safeguards – 2026 FIFA World Cup invitation (10 marks)
*IRBA Code of Professional Conduct, Section 420: Gifts and Hospitality
Ethical concerns:
1. *Independence threat – Self-interest & Familiarity*: Accepting flights, match tickets,
hospitality & accommodation from Titan creates a self-interest threat. The value is likely
significant and could influence the auditor’s objectivity.
2. *Independence threat – Intimidation*: The CEO framing it as a “well-deserved break after
a busy audit season” may create a sense of obligation to be lenient during the audit.
3. *Appearance of independence*: Even if objectivity isn’t impaired, a reasonable third
party would conclude independence is compromised due to the excessive hospitality.
Safeguards to apply:
1. *Evaluate significance*: Determine the value of the hospitality. Because it includes
international flights, accommodation, and match tickets, it exceeds “trivial and
inconsequential” – therefore cannot be accepted.
2. *Decline the offer*: The firm should politely decline the invitation and explain that IRBA
Code prohibits accepting gifts/hospitality that may create threats to independence.
3. *Communicate with those charged with governance*: Inform Titan’s audit committee of
the offer and the firm’s decision to decline to maintain transparency.
4. *Document the threat and safeguards*: Record the offer, evaluation, and action taken in
the audit file per Section 120.
5. *Firm policies*: Reinforce firm policies on gifts/hospitality with all audit team members.
If the offer were modified to only include match tickets of trivial value, safeguards could
include paying for own flights/accommodation and disclosing to TCWG. But as presented,
it must be declined.
1. Ethical concerns and safeguards – 2026 FIFA World Cup invitation (10 marks)
*IRBA Code of Professional Conduct, Section 420: Gifts and Hospitality
Ethical concerns:
1. *Independence threat – Self-interest & Familiarity*: Accepting flights, match tickets,
hospitality & accommodation from Titan creates a self-interest threat. The value is likely
significant and could influence the auditor’s objectivity.
2. *Independence threat – Intimidation*: The CEO framing it as a “well-deserved break after
a busy audit season” may create a sense of obligation to be lenient during the audit.
3. *Appearance of independence*: Even if objectivity isn’t impaired, a reasonable third
party would conclude independence is compromised due to the excessive hospitality.
Safeguards to apply:
1. *Evaluate significance*: Determine the value of the hospitality. Because it includes
international flights, accommodation, and match tickets, it exceeds “trivial and
inconsequential” – therefore cannot be accepted.
2. *Decline the offer*: The firm should politely decline the invitation and explain that IRBA
Code prohibits accepting gifts/hospitality that may create threats to independence.
3. *Communicate with those charged with governance*: Inform Titan’s audit committee of
the offer and the firm’s decision to decline to maintain transparency.
4. *Document the threat and safeguards*: Record the offer, evaluation, and action taken in
the audit file per Section 120.
5. *Firm policies*: Reinforce firm policies on gifts/hospitality with all audit team members.
If the offer were modified to only include match tickets of trivial value, safeguards could
include paying for own flights/accommodation and disclosing to TCWG. But as presented,
it must be declined.
