CA Inter P5 · Chapter 11 · Question 3 of 13
CA Mohit has been the engagement partner on the audit of Sundaram Textiles Ltd. for twelve years and regularly holidays with its finance director. The principal threat to his independence is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Familiarity threat
Explanation
A familiarity threat arises when, due to a long or close relationship with a client, the auditor becomes too sympathetic to their interests or too accepting of their work. Long association with a senior client official and close personal relations are classic examples. Safeguards include rotation of the engagement partner.
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