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Under SA 220, if the engagement partner discovers, during planning, that the firm fails an independence requirement, the appropriate course is to:
ATreat it as a routine matter
BTake action to eliminate or reduce the threat to acceptable level, and document; if not feasible, withdraw
CContinue the audit and disclose the breach in the report
DNotify the regulator only after issuing the report
Answer & Solution
Correct answer: C. Continue the audit and disclose the breach in the report
1. SA 220.11 requires safeguards to eliminate/reduce threats; withdrawal if not feasible.
2. Continuing without safeguards or treating as routine compromises the audit.
3. Regulator notification is a separate consideration but does not cure independence.
_Source: ICAI BoS CA Final Paper 3, Ch 2 "Audit Planning Strategy and Execution"_
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