Threats
Threats
Self review
Familarity
Advocacy
Intimidation
Self interest
Self-interest threats - Fee dependency - Over-dependence on an audit client could lead the auditor to ignore adjustments required in the financial statements for fear of losing the client.
- Gifts and hospitality - Acceptance of goods, services or hospitality from an audit client can create self-interest and familiarity threats as the auditor may feel indebted to the client. The offer of gifts and hospitality must be documented in the audit file even if refused.
- Owning shares/financial interests - The auditor will want to maximize return from the investment and overlook audit adjustments which would affect the value of their investment.
- Loans and guarantees - A loan or guarantee from (or deposit with) an assurance client will not create a threat to independence provided that: i) it is on commercial terms, and ii) made in the normal course of business.
- Business relationships – JV, partnership
- Potential employment with an audit client, and etc.
Familiarity threats - Long association of senior personnel
- Family and other personal relationships
- Recruitment services - Familiarity, self-interest and intimidation threats may occur if the firm is involved in recruiting senior personnel for the client.
- Audit staff leave the firm to join the client - A self-interest, familiarity or intimidation threat may arise where an employee of the firm becomes a director or employee of an assurance client.
Self-review threats - Accounting and bookkeeping services
- Internal audit services
- Taxation services
- Tax advice
- IT services
- Valuation services
- Temporary staff assignments
- Corporate finance services
- Client staff joins audit firm
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