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ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting

Lumen Co's finance team prepares the financial statements. The chief accountant, Rosa, also sits on the committee that approves the same estimates she prepared for impairment of non-current assets, reviewing her own judgements. Which threat arises, and which safeguard is most suitable?

Rosa faces a self-review threat because she reviews estimates she prepared. The suitable safeguard is independent review of those estimates by a person not involved in preparing them, which restores objectivity in the impairment assessment.

  1. AFamiliarity threat; rotate Rosa to another department every year
  2. BIntimidation threat; give Rosa a formal whistleblowing policy
  3. CAdvocacy threat; require Rosa to disclose shareholdings
  4. DSelf-review threat; have the estimates reviewed by someone independent of their preparationCorrect

Explanation

Evaluating one's own judgements creates a self-review threat. An independent reviewer who did not prepare the estimates directly addresses it. Rotation, whistleblowing policies and shareholding disclosures address other threats.

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