SRT & Co., Chartered Accountants, are the statutory auditors of Dee Infra Projects Ltd., a listed company engaged in large infrastructure…

In the given case, issues relating to independence and ethical requirements have arisen during the audit engagement. As per SA 220, the Engagement Partner is responsible for forming a conclusion on compliance with relevant ethical requirements, including independence. The responsibilities of an engagement partner in relation to ethical requirements in an audit engagement are as under: - Identifying a threat to independence regarding the audit engagement that safeguards may not be able to eliminate or reduce to an acceptable level. In the present case, financial interest held by the spouse of a team member, provision of consultancy services, and offer of advisory position may create self-interest, self-review, and familiarity threats. The Engagement Partner must evaluate whether these threats are significant and whether available safeguards (such as removal of the concerned team member, independent review, or discontinuation of non-audit services) can reduce the threats to an acceptable level. Reporting by engagement partner to the relevant persons within the firm to determine appropriate action, which may include eliminating the activity or interest that creates the threat, or withdrawing from the audit engagement, where withdrawal is legally permitted. Accordingly, Mr. A must communicate these matters to the appropriate authority within the firm (such as the Ethics Partner or Managing Partner). If safeguards are not sufficient to mitigate the threats, appropriate action must be taken. This may include: Disposal of the financial interest,Removal of affected personnel from the engagement,Discontinuation of conflicting services, orWithdrawal from the audit engagement, where withdrawal is legally permitted. In the given case, the Engagement Partner is duty-bound under SA 220 to evaluate the identified threats to independence, ensure compliance with ethical requirements, and take appropriate corrective action. If the threats cannot be eliminated or reduced to an acceptable level through safeguards, the firm must either eliminate the underlying cause or withdraw from the engagement, as permitted by law. Failure to do so would amount to non-compliance with SA 220 and compromise the quality and credibility of the audit.