Threats to Fundamental Principles Self-interest When the financial interests of

Question

Threats to Fundamental Principles Self-interest When the financial interests of the auditor or relative are involved. Self-review When an auditor evaluates a situation that is a consequence of a previous judgment or advice by the auditor or the auditor's firm. Advocacy When the auditor promotes a position or opinion to the point where subsequent objectivity may be compromised. When an auditor becomes too sympathetic to the interests of another party because of a close relationship. Familiarity Intimidation When an auditor's actions may be compromised by actual or perceived threats explain and provide examples

Explanation / Answer

(a)Self interest-

A close personal relationship between a member of the audit team and an employee of a client company can create self-interest, intimidation, and familiarity threatsto objectivity because the audit team member may not be sufficiently sceptical of, or sympathetic towards the employee with whom they have a relationship.

Examples
? Financial interest in a client
? Undue dependence on total fees
? Concerns about loosing a client
? Potential employment with client
? Contingency fee
? Loan to or from client

(b)Self review-

which may occur when a previous judgement needs to be re-evaluated by the member responsible for that judgement

Example

(c) Advocacy threat-

Which may occur when a member promotes a position or opinion to the point that subsequent objectivity may be compromised

Examples

(d) Familiarly threat-

When you become so sympathetic to the interests of others as a result of a close relationship that your professional judgement becomes compromised. The code establishes a conceptual framework that requires a professional accountant to identify, evaluate, and address threats to compliance with the fundamental principles.
Examples
A member of engagement team having a close family relationship with a director or officer of the client Former partner of the firm being director or officer of the client.

(e)Intimidation threats-

which may occur when a member may be deterred from acting objectively by threats, whether actual or perceived.

the threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant”
Example

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