ExpertEasy2 marksMultiple Choice
ACCA · Question 12 · Syllabus F: Professional ethics
[Section A] An audit partner has been in charge of the external audit for a major retail client for the past 12 years. Over this time, the partner has developed a close personal friendship with the client's CEO, frequently playing golf together and attending each other's family weddings. Which IFAC structural threat is most likely to compromise the auditor's objectivity?
[Section A] An audit partner has been in charge of the external audit for a major retail client for the past 12 years. Over this time, the partner has developed a close personal friendship with the client's CEO, frequently playing golf together and attending each other's family weddings. Which IFAC structural threat is most likely to compromise the auditor's objectivity?
Answer options:
A.
Intimidation threat
B.
Advocacy threat
C.
Self-interest threat
D.
Familiarity threat
How to approach this question
Identify the core issue: a long-term personal relationship between the auditor and the client.
Full Answer
D.Familiarity threat✓ Correct
A familiarity threat occurs when, due to a long or close relationship with a client, a professional accountant becomes too sympathetic to their interests or too accepting of their work. Audit rotation rules exist specifically to mitigate this threat.
Common mistakes
Confusing familiarity with self-interest. While keeping a friend as a client has self-interest elements, the specific threat generated by long tenure and friendship is Familiarity.
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