ICAEW ARF · Chapter 10 · Question 4 of 12
A senior partner has acted as audit engagement partner for the same client for many years and has developed close friendships with its directors. Which threat does this create?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Familiarity
Explanation
Long association with a client can create a familiarity threat because the partner may become too sympathetic to the directors and less sceptical. A common safeguard is rotating senior personnel off the engagement. Self-interest involves financial or other personal interests, and self-review involves checking the firm's own work.
More Professional ethics: principles, threats and safeguards MCQs
- Q6An audit firm promotes the shares of an audit client to potential investors. Which threat does this create?
- Q7An audit manager has inherited shares in a company that the firm audits. What is the appropriate action?
- Q8Fees from one audit client form a large and growing proportion of an audit firm's total fee income. Which threat arises and which…
- Q9An audit client offers the audit team free tickets to a major sporting event as thanks for their work. What should the audit team do?
- Q10Which of the following fee arrangements for a statutory audit would be unacceptable?