[Section B - MTQ] SCENARIO: An audit firm is auditing 'BuildCorp'. The Audit Partner, David, has been best friends with BuildCorp's CEO since university. During the audit, a junior auditor discovers that BuildCorp has been deliberately hiding cash revenues to evade taxes. The CEO privately offers David a lucrative consulting contract if the audit firm ignores the tax evasion.

Select the FOUR correct statements regarding the ethical threats and required actions.

David's long-standing friendship with the CEO creates a 'Self-review threat'.

David's long-standing friendship with the CEO creates a 'Familiarity threat'.

The CEO's offer of a lucrative consulting contract creates a 'Self-interest threat'.

Because of the principle of Confidentiality, the audit firm is legally forbidden from reporting the tax evasion to the authorities.

Ignoring the tax evasion would uphold the IFAC principle of 'Professional Behavior' because it keeps the client happy.

Ignoring the tax evasion would be a direct breach of the IFAC principle of 'Integrity'.

An appropriate safeguard would be to remove David from the audit engagement entirely due to the severe familiarity threat.

The junior auditor should accept the consulting contract on David's behalf to diffuse the tension.