ExpertEasy2 marksMultiple Choice
ACCA · Question 24 · Syllabus F: Professional ethics
[Section A] An audit firm is asked by its client to help promote the client's upcoming Initial Public Offering (IPO) by speaking at investor roadshows and endorsing the financial health of the company. If the audit firm agrees, which ethical threat will be created?
[Section A] An audit firm is asked by its client to help promote the client's upcoming Initial Public Offering (IPO) by speaking at investor roadshows and endorsing the financial health of the company. If the audit firm agrees, which ethical threat will be created?
Answer options:
A.
Self-review threat
B.
Advocacy threat
C.
Intimidation threat
D.
Familiarity threat
How to approach this question
Recognize the act of 'promoting' or 'endorsing' a client to third parties.
Full Answer
B.Advocacy threat✓ Correct
An advocacy threat arises when a professional accountant promotes a client's position or interests. Endorsing a client's shares during an IPO compromises the auditor's perceived independence, as they are acting as a salesperson rather than an objective evaluator.
Common mistakes
Selecting self-interest. While the firm might want the IPO to succeed to get higher fees, the direct action of promoting the client is the definition of an Advocacy threat.
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