a. Types of Threats Auditors Face:

1. Self-Interest Threat: This occurs when an auditor has a financial interest in the audit client, such as owning shares or having significant financial ties.
2. Self-Review Threat: This arises when an auditor is required to review their own previous work, particularly in cases where the auditor provided non-audit services to the client.
3. Familiarity Threat: This occurs when an auditor becomes too close to the client due to long-term relationships, which may impair objectivity and independence.

b. Circumstances Giving Rise to These Threats:

1. Self-Interest Threat: Situations where the auditor or audit firm holds shares or has investments in the client’s company, or if significant fees are charged for services provided to the client.
2. Self-Review Threat: Arises when the auditor has provided both auditing and consulting services, leading to a scenario where the auditor must audit decisions or work they were involved in.
3. Familiarity Threat: Long-term relationships between the audit firm and the client, or when family members of the auditor work at a senior level in the audit client’s organization, leading to potential bias.

c. Safeguards to Mitigate Threats:

1. Independence Safeguards: Ensuring audit independence by implementing firm-wide policies that prevent any auditor with significant financial interests or close relationships from auditing the client.
2. Quality Control Safeguards: Establishing quality control procedures within the firm, such as peer reviews or independent reviews of audit engagements to detect and correct biases.
3. Rotation of Audit Personnel: To avoid familiarity threats, audit firms can implement policies requiring the rotation of audit team members on client engagements after a set period.