ExpertEasy2 marksMultiple Choice
ACCA · Question 28 · Professional ethics
A boutique consulting firm derives 60% of its annual revenue from a single client, a massive multinational agricultural conglomerate. The conglomerate's CEO tells the consulting partner, 'If you don't sign off on this aggressive tax strategy, we will take our business elsewhere.' What type of ethical threat is the consulting firm facing?
A boutique consulting firm derives 60% of its annual revenue from a single client, a massive multinational agricultural conglomerate. The conglomerate's CEO tells the consulting partner, 'If you don't sign off on this aggressive tax strategy, we will take our business elsewhere.' What type of ethical threat is the consulting firm facing?
Answer options:
A.
Advocacy threat
B.
Intimidation threat
C.
Self-review threat
D.
Familiarity threat
How to approach this question
Look at the CEO's action: 'If you don't... we will take our business elsewhere.' This is a direct threat designed to coerce the accountant. This is Intimidation.
Full Answer
B.Intimidation threat✓ Correct
An intimidation threat occurs when a professional accountant is deterred from acting objectively by threats, actual or perceived. The threat of losing a dominant client (fee dependency) is a classic example of an intimidation threat.
Common mistakes
Choosing Self-interest threat. While the firm has a self-interest in keeping the fees, the *act* of the client threatening to leave specifically triggers an Intimidation threat.
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