The objectivity of an expert is compromised when he/she is involved with related party

activities. Among the 7 client acceptance procedures “determine if the client can meet the ethical
requirements” deals with the independence of the auditor. The Committee should not agree to the
audit firm providing a service which may compromise their independence or violate any laws or
regulations affecting their appointment as auditors. In considering whether to give approval the
Committee should not agree to the audit firm providing a service if the result is that:
 the external auditor audits its own firm’s work;
 the external auditor makes management decisions for the Company;
 a mutuality of interest is created; or
 the external auditor is put in the role of advocate for the Company.
The audit firm or any member of the network to which the audit firm belongs, shall not directly
or indirectly provide to the Company any prohibited non-audit services in:
(a) the period between the beginning of the period audited and the issuing of the audit report; and
(b) the financial year immediately preceding the period referred to in point (a) in relation to
designing and implementing internal control or risk management procedures related to the
preparation and/or control of financial information or designing and implementing financial
information technology systems.

The objectivity of an expert is compromised when he is involved with related party activities.
The objective of an expert is to form an independent opinion on the financial statements of the
audited entity. But, if an expert is involved with related party activities in organizations, then he
would not be able to form an independent opinion on the financial statements of the
organizations. “determine if the client can meet the ethical requirements” is one of the client
acceptance procedures and it deals with the independence of the auditor. The Committee should
not agree to the audit firm providing a service which may compromise their independence or
violate any laws or regulations affecting their appointment as auditors. If the external auditor
audits its own firm’s work, then the committee should not give approval to the audit
firm.However,The committee should not also give approval to the audit firm, If the external
auditor takes management decisions for the company and if the threat of interest is created.So,it’s
important to maintain the objectivity of an expert when he involved with related party activities.