If an auditor served as a director of a client two years prior to the audit, what should they consider about taking on the audit engagement?

When an auditor has previously served as a director at a client organization, even if two years have passed, this creates a potential conflict of interest that compromises the auditor's independence. Independence is a cornerstone of auditing as it ensures that auditors maintain an unbiased perspective when reviewing a client's financial statements.

Continuing or establishing independence after serving in an operational role such as a director is challenging because there could still be inherent biases or loyalties towards the client. Hence, being associated with the company in a significant capacity, like a director, raises ethical concerns about the auditor's ability to remain objective and impartial during the audit process.

Therefore, it is prudent for the auditor to avoid the engagement due to the past relationship. This action both safeguards the integrity of the audit process and upholds the fundamental principles of independence, thereby maintaining public confidence in the audit profession.