A firm prepares a client's financial statements and then audits the same financial statements. Which threat does this create?
Answer and explanation
Correct answer: B. A self-review threat
- Step 1: The threat arises because the firm would evaluate its own work.
- Step 2: That is a self-review threat.
Answer
A self-review threat.
Why not the others: Intimidation arises when the auditor is deterred from acting objectively by threats. Familiarity arises from a close relationship, which is not described. Advocacy arises when the firm promotes the client's position, such as in a dispute.
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