Corporate Reporting Ethics: Your Audit Senior Just Joined the Client

This topic is covered as ETH.10 in our Corporate Reporting Model Answer Notes, which are built entirely from ICAEW Question Bank model answers: https://learn.paradigmshift.training/course/cr-man-2026

People move between firms and their clients constantly. It is one of the most common career paths in the profession, and it is examined regularly for exactly that reason. There are three directions of travel and each has a different answer, so identify which one you are dealing with before you write anything.

A team member joins the client

The first question is whether they were the engagement partner. If they were, the firm cannot continue as auditor for a period. If they were not, the analysis is quite different.

In the MRL scenario the individual was a senior manager rather than the partner, and the firm could therefore continue. That is a single sentence that decides the direction of the whole answer, so establish it first rather than working through general familiarity points and arriving at it late.

Four further questions follow, and each is worth marks.

Were they in discussion about the role while still working on the audit? This is the question candidates most often miss and it is the most damaging one. If someone was negotiating a job with the client while auditing them, their judgement during that period is open to challenge, because they had a personal interest in keeping the client happy at precisely the time they were meant to be objective. The consequence is not just an independence issue going forward. It is a question about work already completed and signed off.

Does the composition of the audit team need to change? Team members who are close to the individual, or who are accustomed to working under their direction, may lack independence now that the person has moved from colleague to client. A senior who spent three years being reviewed by this individual may find it hard to challenge them across the table, and the threat sits with the team rather than with the leaver. Saying so shows you have thought past the obvious.

Should the quality of their prior work be re-examined? This follows from the first question and is a practical step the firm can take.

And has confidential information about the firm's audit approach moved with them? Someone who knows how the firm samples, where it sets performance materiality and which areas it treats as low risk takes a meaningful advantage into their new role. That is a threat to the effectiveness of future audits, not merely to appearances.

The other two directions

A client employee joining the firm is more straightforward. Assess independence in relation to that client, and do not assign them to the engagement where their prior role would create a self-review threat. Someone who prepared the numbers cannot audit them a year later, however capable they are and however much they would like to. Depending on their previous seniority, a cooling-off period before they work on that client at all may be appropriate.

A former partner joining the client's board raises a different issue again: any continuing financial interest in the firm. A pension entitlement counts, and it may prevent the appointment altogether. That is the detail candidates most often miss, because a pension does not feel like an investment in the way that shares do. For these purposes it can behave like one, particularly where the pension is unfunded and depends on the firm's continuing profitability, since the former partner then has a direct financial stake in how the firm fares.

The short version

Partner or not partner is the first question, and it determines everything after it.

Discussions during the audit taint the work already done, so ask when the conversation started, not just when the job began.

Reconsider the composition of the team, not just the position of the individual who left.

And remember that a pension can be a continuing financial interest.

Four points, each a sentence or two in an answer. This is a topic where a structured response scores well without needing length, provided you resist the urge to write everything you know about familiarity threats before answering the question that was actually asked.