What is familiarity threat in auditing?

A familiarity threat is the threat that due to a long or close relationship with a client or employer, a professional accountant will be too sympathetic to their interests or too accepting of their work (100.12(d)). Self review threat This occurs when an auditor has to review work that they previously performed.

How do you mitigate audit threats?

The threat created can be reduced to an acceptable level by the application of the following safeguards:

1. Ask the individual to notify the firm when entering serious employment negotiations with the assurance client;
2. Remove of the individual from the assurance engagement;

What is ethical threat in auditing?

An ethical threat is a situation where a person or corporation is tempted not to follow their code of ethics. An ethical safeguard provides guidance or a course of action which attempts to remove the ethical threat. Ethical threats apply to accountants – whether in practice or business.

How can auditors reduce familiarity threats?

Examples of safeguards that can be applied include:

1. Changing the role of the senior personnel on the attest engagement team or the nature and extent of the tasks the senior personnel perform.
2. Having a professional accountant who was not included on the attest engagement team review the work of the senior personnel.

What is an example of a familiarity threat?

Familiarity Threat A familiarity threat exists if the auditor is too personally close to or familiar with employees, officers, or directors of the client company. ABC Company has been audited by the same auditor for over 10 years and the auditor regularly plays golf with the CEO and CFO of ABC Company.

What are audit threats?

THREATS AND SAFEGUARDS Self-interest. The threat that arises when an auditor acts in his or her own emotional, financial or other personal self-interest. Self-review. The threat of bias arising when an auditor audits his or her own work or the work of a colleague.

What is intimidation threat?

Intimidation Threat An intimidation threat exists if the auditor is intimidated by management or its directors to the point that they are deterred from acting objectively.

What are the main threats to auditors ethics?

However, there are some threats that auditors may face which may endanger their independence as well as objectivity. These threats include self-interest, self-review, familiarity, intimidation, and advocacy threats. An explanation of each of these is as below.

What is intimidation in audit?

Intimidation threat is when a client’s management attempts to intimidate or place undue influence on auditors. In these cases, auditors need to employ safeguards to reduce these threats or prevent them altogether.