1
Q
Expand on the ethical threat “familiarity”
A
An audit company working for a client more than 7 years. There is a threat of the company not maintaining previous levels of professionalism, scepticism (doubtfulness), and objectivity (fairness)
2
Q
How can you manage the risk of the ethical threat Familiarity
A
- Audit company can rotate engagement staff after long periods and monitor relationships between staff and client
- best practice recommends engagement partners rotate after 7 years for public interest companies. So should consider appointing a different audit partner
3
Q
Expand on ethical threat “conflict of interest/self interest”
A
“Family or friend has a job with the client”
- potential for opportunity in self interests for the auditor and family/friend in their objectives in the company (if involved in financial statement process)
4
Q
How can you manage the threat of conflict of interest/self interest
A
- put safeguards in place to avoid such risks, such as appointing a different audit partner (unlikely for certain positions to influence financial statements)
