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

An accountant in practice is told by a major client's chief executive that unless the firm accepts the client's proposed accounting treatment, the client will move all its work to another firm and may bring a legal claim. Which statement about the threat and the appropriate response is correct?

This is an intimidation threat. The client is using the threat of losing the work and of legal action to deter the accountant from acting objectively. The accountant must not yield, should apply safeguards such as escalation, and should decline or withdraw if the threat cannot be reduced adequately.

  1. AIt is an advocacy threat, and the accountant should promote the client's treatment if it is legal
  2. BIt is a self-review threat, and the accountant should ask a colleague to redo the earlier work
  3. CIt is an intimidation threat, and the accountant must not let the pressure override professional judgement, applying safeguards or declining the engagement if necessaryCorrect
  4. DIt is a familiarity threat, and the accountant should rotate off the engagement only after the year end

Explanation

Threats of losing the client or litigation are attempts to deter objective judgement, which is an intimidation threat. The accountant must evaluate it and apply safeguards, such as consulting senior colleagues or escalating to those charged with governance, or decline or withdraw if it cannot be reduced to an acceptable level. Advocacy is about promoting a position, not being pressured.

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