Hi everyone, it is nice to see you, I am here to make a short presentation on the potential

independence/ethical concerns pertaining to the scenario that was presented to me.

The scenario presented is regarding an audit client of RSM, which is an AIM listed entity
with market capitalisation of £170 million (200 million). According to the
Implementation Guidance dated 26 May 2020, an AIM-listed entity is considered an
Other Entity of Public Interest (OEPI) if its market capitalization exceeds €200 million
over the preceding three calendar years. Therefore, it is possible that more stringent
rules may be applicable to this company in the next few years, therefore I will also
comment on specific OEPI implications where relevant. But before we dive in let us do a
general overview of independence and the provision of non-audit services.

OEPI are subject to more stringent independence requirements including the provision
of non-audit services. As per the revised ethical standards, PIE and OEPI can only
perform certain services that are whitelisted on the standard (Such as). Let’s get into
more details specific to this case. I have identified a total of 5 potential issues which
might compromise the auditor’s independence and integrity. The issues are as follows:

 Long Association – This creates a familiarity threat which basically means that
the RI may not be sufficiently challenging of the CFO and make take representations
made by the CFO at face value without sufficient challenge and professional
skepticism based on personal relationships.

 Personal Relationships – Same as above

 Installation of Accounting Software – Regardless of whether the entity is OEPI

or not, the ethical standards identify that installation of accounting software as
something that is specifically prohibited as long as the accounting software is
directly involved in the production of the financial statements. This creates Self
review and management threats.

 Tax Services with fees based on ability to reduce tax liability – Regardless
of whether the entity is an OEPI or not, the ethical standards specifically prohibit
any kind of engagement with contingent fees arrangements. In this case the client
wants us to reduce the tax liability and based on the reduction of our fees would be
determined that this creates a threat to self-interest. A self interest threat is where
potential for financial gain or loss could affect our judgment and leads us to making
decisions that could maximize financial benefits for us rather than decisions which
are based on integrity and good judgement.

 Assisting in an employee dispute abroad – Any non-audit service creates a

self-interest threat as our judgment related to the audit engagement may be
impaired due to fear of losing the non-audit services business. Since we are acting on
behalf of the management in the dispute, this creates advocacy threats which are
basically the threats that we would be seen as advancing management decisions.
This also creates self-review threats as we will be auditing the amount of provision to
be included in the annual accounts in respect to the dispute.

In conclusion, each of these points underscores the vital importance of upholding our
integrity and objectivity as auditors, in line with the revised ethical standards, and
particularly considering the potential OEPI classification of our client.