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

An audit senior holds a significant number of shares in an audit client and the value of the shares depends on the client's reported profit. Which statement best describes the threat and the principle mainly at risk?

It is a self-interest threat mainly endangering objectivity. Because the senior's share value depends on the client's reported profit, there is a financial incentive that could bias judgements, whereas advocacy, familiarity and intimidation do not describe this situation.

  1. AAdvocacy threat to professional competence and due care
  2. BSelf-interest threat to objectivityCorrect
  3. CFamiliarity threat to confidentiality
  4. DIntimidation threat to professional behaviour

Explanation

A financial interest in a client creates a self-interest threat, because the senior may benefit from favourable reporting. This mainly endangers objectivity. Advocacy would involve promoting the client's position, which is not described.

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