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ACCA Applied Knowledge · Business and Technology · Fundamental principles of ethical behaviour

An accountant has worked with the same client's finance director for twelve years and is close friends with her. The accountant now accepts her explanations without testing them. Which statement about this situation is MOST accurate?

This is a familiarity threat, caused by a long and close relationship leading to excessive trust. It can be reduced by safeguards such as rotating the accountant off the engagement or an independent review of the work, so the threat need not force anyone to leave the profession.

  1. AIt is a familiarity threat, and safeguards such as rotating the accountant off the engagement may reduce itCorrect
  2. BIt is a self-interest threat, which can only be removed by resigning from the profession
  3. CIt is an advocacy threat, because the accountant is promoting the client's shares

Explanation

Being too sympathetic to or trusting of someone because of a long, close relationship is a familiarity threat. Safeguards include rotating senior personnel or having an independent review. Nothing suggests advocacy or that resignation from the profession is needed.

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