An audit manager has been leading the audit of the same listed client for the past 9 years and has become close personal friends with the CFO. What threat is created, and what is the most appropriate safeguard?

Correct answer: B) Familiarity threat; safeguard is to rotate the audit manager off the engagement team.

Explanation

A long association with a client creates a familiarity threat, where the auditor becomes too sympathetic to the client's interests and loses professional skepticism. The standard safeguard for listed entities is mandatory rotation of key audit personnel.