a) Circumstances Leading to Different Threats to Ethical Principles

1. Self-Interest Threats
   Self-interest threats arise from the financial or other interests of members or their close family members. Circumstances include:
   • Holding financial interests, loans, or guarantees with a client.
   • Concern about employment security, such as an incentive compensation arrangement dependent on financial performance.
2. Self-Review Threats
   Self-review threats occur when a previous judgment needs to be re-evaluated by the same individual. Circumstances include:
   • Reviewing one’s work, such as a significant error found during re-evaluation.
   • Reporting on the operation of a system one was involved in designing or implementing.
3. Advocacy Threats
   Advocacy threats occur when a professional promotes a position to the extent that objectivity may be compromised. Circumstances include:
   • Promoting shares in a company that is also a client.
   • Acting as an advocate for a client in litigation.
4. Familiarity Threats
   Familiarity threats arise when there is a close relationship with a client, leading to a lack of objectivity. Circumstances include:
   • Long association with a client influencing objectivity.
   • Accepting gifts or preferential treatment from a client unless the value is clearly insignificant.
5. Intimidation Threats
   Intimidation threats occur when an individual’s conduct is influenced by fear or threats. Circumstances include:
   • Threat of dismissal or replacement over disagreements.
   • Pressure to reduce work scope inappropriately to minimize fees.

b) Safeguards to Eliminate or Reduce Threats

1. Safeguards to Self-Interest Threats
   • Notify the firm if involved in employment negotiations with a client.
   • Perform an independent review of judgments made by the affected individual.
2. Safeguards to Self-Review Threats
   • Engage an additional accountant for a peer review.
   • Implement independent internal quality reviews.
3. Safeguards to Advocacy Threats
   • Modify the assurance plan to ensure independence.
   • Conduct a quality control review of the engagement.
4. Safeguards to Familiarity Threats
   • Assign an experienced team to review the work objectively.
   • Avoid benefits that could threaten independence, limiting engagement scope as needed.
5. Safeguards to Intimidation Threats
   • Ensure no undue benefits or payments are received, reducing influence.
   • Engage an additional team to provide an independent review of work.