An audit partner owns shares in a company that the firm is auditing. Which type of threat to compliance with the fundamental principles does this create?
Answer and explanation
Correct answer: D. Self-interest threat
- Step 1: A financial interest in a client gives the accountant a reason to favour that client.
- Step 2: That is a self-interest threat.
Answer
Self-interest threat.
Why not the others: Intimidation threat: Intimidation arises when the accountant is deterred from acting objectively by threats. Familiarity threat: Familiarity arises from a close relationship that makes the accountant too sympathetic. Advocacy threat: Advocacy arises when the accountant promotes a client's position to the point that objectivity is compromised.
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