AAA – L3 – SA – Q4.2 – Auditor Independence Threat

Threat from accepting a loan from a client.

Question

An auditor shall not accept a loan on favorable commercial terms from an audit client because of the threat to his or her independence. The threat would be a:

A Self-interest threat

B Self-review threat

C Advocacy threat

D Familiarity threat

Answer

Explanation:

Accepting a loan on favorable terms from an audit client creates a self-interest threat, as the auditor’s financial interest could compromise objectivity. A self-review threat (B) involves auditing one’s own work, an advocacy threat (C) involves promoting the client, and a familiarity threat (D) arises from close relationships. Thus, A is the correct answer.

Tags: Auditor Ethics, ICAG, Independence, Self-Interest Threat
Level: Level 3

Topic: Rules of Professional Conduct

Uploader: Salamat Hamid