Question

From the dropdown menu provided, select a form of threat to independence that relates to each of the example listed in the table below. Threats to Independence Examples An audit firm relies on the fees from a client. An assurance team audits records that were prepared by a colleague in their firm on behalf of the client. An auditor represents an audit client in a legal case. An auditor has a family member involved in the preparation of the accounting information subject to audit. The audit firm is threatened with litigation by their audit client. <

Answer 1

1) Solution: Self-interest threat
Explanation: A self-interest threat occurs when the auditors is having a direct or indirect financial interest with company

2) Solution: Self-review threat
Explanation: A self-review threat occurs when the auditors are auditing their own work or their firm's work.

3) Solution: Advocacy threat
Explanation: When the auditor is involved in the client's promotion where auditor's objectivity can be compromised potentially, it results to the advocacy threat

4) Solution: Familiarity threat
Explanation: Familiarity threat occurs if the auditor personally closes with officers, employees, or directors of an audit client's company

5) Solution: Intimidation Threat
Explanation: Intimidation threat arises when auditor do not want to lose a client