[Section A] An audit firm is asked by its client to help promote the client's upcoming Initial Public Offering (IPO) by speaking at investor roadshows and endorsing the financial health of the company. If the audit firm agrees, which ethical threat will be created?

Answer options:

Self-review threat

Advocacy threat

Intimidation threat

Familiarity threat

How to approach this question

Recognize the act of 'promoting' or 'endorsing' a client to third parties.

Full Answer

B.Advocacy threat✓ Correct

An advocacy threat arises when a professional accountant promotes a client's position or interests. Endorsing a client's shares during an IPO compromises the auditor's perceived independence, as they are acting as a salesperson rather than an objective evaluator.

Common mistakes

Selecting self-interest. While the firm might want the IPO to succeed to get higher fees, the direct action of promoting the client is the definition of an Advocacy threat.

Question 23 All questions Question 25

Practice the full ACCA BT — Business & Technology Practice Exam 2

52 questions · hints · full answers · grading

More questions from this exam

Q01[Section A] A global non-governmental organization (NGO) providing clean water infrastructure in ...Medium Q02[Section A] 'NovaTech', a rapidly growing AI startup, was initially built around its charismatic ...Medium Q03[Section A] A multinational pharmaceutical company is implementing blockchain technology to track...Medium Q04[Section A] A newly assembled cross-border remote team of software developers is currently experi...Easy Q05[Section A] An emergency room administrator at a busy urban hospital uses the Urgent/Important ma...Medium

View all 52 questions →