AA – L2 – SA – Q2.3 – Ethical Threats

Threats from auditing a company with partner connections.

Question

Peak & Co has been approached to audit Skyline plc, a listed company, which is a public interest entity. A partner in Peak & Co has shares in Skyline plc and another partner’s brother is the CEO of Skyline plc.

What types of threats would taking-on the audit of Skyline plc present?

A Advocacy and self-interest threats

B Self-review and self-interest threats

C Familiarity and self-interest threats

D Advocacy and intimidation threats

Answer

Explanation:
A partner’s shareholding creates a self-interest threat due to financial interest in the client. The partner’s brother being CEO creates a familiarity threat due to close personal ties. Advocacy (A, D) and self-review (B) threats are not relevant here, as there’s no promotion of the client or prior work review involved. Intimidation (D) is also not indicated. Thus, C is correct.

Tags: Ethical Threats, Familiarity, ICAG, Public Interest Entity, Self-Interest
Level: Level 2

Topic: Professional and Ethical Considerations

Uploader: Salamat Hamid