Threats are
circumstances or relationships that can compromise a member’s compliance
to the AICPA Code of Professional Conduct and/or their independence. There are various categories of threats including self-review, advocacy, adverse interest, familiarity, undue influence, self-interest, and management participation.
What is adverse threat?
The adverse interest threat is
a threat that a member will not act with objectivity because the member’s interests are opposed to the client’s interests
.
What type of threat happens when a member promotes a client or employer’s position to the point that his or her objectivity is compromised?
The threat that a member will promote a client or employer’s position to the point that his or her objectivity is compromised.
What is an example of self-review threat?
An example of a self-review threat is:
Preparing source documents used to generate the clients financial statements
. … Threats from higher levels of management create constraints to providing accurate and reliable financial statements.
What is a self-interest threat?
a. Self-interest threats—
threats that arise from auditors acting in their own interest
. Self-interests include auditors’ emotional, financial, or other personal interests. … Therefore, a self-review threat may arise when auditors review judgments and decisions they, or others in their firm, have made.
What is the adverse interest threat?
Adverse interest threat.
The threat that a member will not be objective because his or her interests are in opposition to those of a client or employer
.
What is the advocacy threat?
Advocacy threat
Occurs
when the audit firm, or a member of the audit team, promotes, or may be perceived to promote, an audit client’s position or opinion
. For example: dealing in, or being a promoter of, shares or other securities in an audit client and.
What is intimidation threat?
Intimidation Threat
An intimidation threat exists
if the auditor is intimidated by management or its directors to the point that they are deterred from acting objectively
.
What are ethical safeguards?
An ethical safeguard
provides guidance or a course of action which attempts to remove the ethical threat
. Ethical threats apply to accountants – whether in practice or business. The safeguards to those threats vary depending on the specific threat.
What is a covered member?
Covered member.
This term refers to
an individual, firm or entity capable of influencing an attest engagement
.
How do you solve self review threats?
The most effective safeguard against the self-review threat is
the segregation of teams
. Audit firms that provide non-audit services to clients must use separate members for each assignment. This way, they will never face the threat of having to review their own work.
What is familiarity threat?
The familiarity threat is
when an auditor allows their familiarity with the client to threaten their independence
. Usually, their familiarity leads them to become too trusting of the client and can cause them to make biased decisions.
How do you safeguard intimidation threat?
- Consider the appropriateness or necessity of modifying the assurance plan for the assurance engagement;
- Assigning an assurance team that is of sufficient experience in relation to the individual who has joined the assurance client;
Would be considered as a self-interest threat?
Which of the following would be considered a self-interest threat?
When a member of the assurance team was previously a director or officer of the assurance client
. Acting as the client’s advocate in a legal proceeding. Potential employment with an assurance client.
What is an example of self-interest?
What Is an Example of Self-Interest? Self-interest is anything done for seeking personal gain. An example of self-interest, for example, is
pursuing higher education to get a better job
, so that you can make more money in the future.
What are the five codes of ethics?
- Integrity.
- Objectivity.
- Professional competence.
- Confidentiality.
- Professional behavior.
