ICAEW SE · Chapter 9 · Question 1 of 9
A finance manager's bonus depends on the company reporting profit above a target, and she is responsible for estimating a large provision. Which threat to the fundamental principles does this create?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Self-interest threat
Explanation
A self-interest threat is the threat that a financial or other interest will inappropriately influence an accountant's judgement or behaviour. Her bonus gives her a personal incentive to understate the provision. Safeguards include independent review of the estimate by someone without a similar incentive.
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