ExpertEasy2 marksMultiple Choice
ACCA · Question 27 · Syllabus F: Professional ethics
Section A
AuditPro has been assigned to audit a new client, a fast-growing tech firm. The lead audit partner discovers that the tech firm's newly appointed Financial Controller is his former university roommate and best friend of 20 years. Which structural threat to independence does this situation create?
Section A
AuditPro has been assigned to audit a new client, a fast-growing tech firm. The lead audit partner discovers that the tech firm's newly appointed Financial Controller is his former university roommate and best friend of 20 years. Which structural threat to independence does this situation create?
Answer options:
A.
Self-interest threat
B.
Self-review threat
C.
Advocacy threat
D.
Familiarity threat
How to approach this question
Identify the core issue: a close personal friendship. This makes it difficult to be professionally skeptical. This is the definition of a familiarity threat.
Full Answer
D.Familiarity threat✓ Correct
A familiarity threat occurs when, due to a long or close relationship with a client or employer, a professional accountant becomes too sympathetic to their interests or too accepting of their work. A 20-year friendship with the Financial Controller is a classic example of a severe familiarity threat.
Common mistakes
Assuming it's a self-interest threat because friends might help each other financially. Unless a financial link is stated, the primary threat is familiarity.
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