ExpertMedium1 markMultiple Choice
CPA · Question 43 · Area I: Ethics & General Principles
Which of the following scenarios represents a 'Self-Interest Threat' to independence under the AICPA Conceptual Framework?
Which of the following scenarios represents a 'Self-Interest Threat' to independence under the AICPA Conceptual Framework?
Answer options:
A.
The auditor promotes the client's securities in an initial public offering.
B.
The auditor relies on the client for 25% of the firm's total revenue.
C.
The auditor has a long-standing relationship with the client's CEO.
D.
The auditor takes on the role of management during the audit.
How to approach this question
Map threats: Money/Job = Self-Interest. Promoting = Advocacy. Long relationship = Familiarity. Doing their job = Mgmt Participation. Checking own work = Self-Review.
Full Answer
B.The auditor relies on the client for 25% of the firm's total revenue.✓ Correct
The auditor relies on the client for 25% of the firm's total revenue.
A self-interest threat exists when the member could benefit, financially or otherwise, from an interest in, or relationship with, a client. Excessive fee dependence is a classic financial self-interest threat.
Common mistakes
Confusing Self-Interest with Advocacy.
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