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ACCA Strategic Professional · Strategic Business Leader · Professionalism, ethical codes and the public interest

Marlow & Co, an audit firm, has audited Danvers plc for nine years. The audit engagement partner has recently been invited to join Danvers' family wedding events and regularly lunches with the finance director, and the team has begun to accept management explanations without challenge. Which threat is most evident, and which safeguard is most appropriate?

The main threat is familiarity, caused by the partner's long association and close personal relationships with Danvers' management, which has reduced professional scepticism. Appropriate safeguards include rotating the engagement partner and carrying out an independent engagement quality review. The other threats are not described in the facts.

  1. AFamiliarity threat; rotate the engagement partner and apply an independent reviewCorrect
  2. BSelf-review threat; decline all non-audit services
  3. CIntimidation threat; report the finance director to the regulator
  4. DAdvocacy threat; disclose the fees to the shareholders

Explanation

Long association and close personal relationships with the client's management create a familiarity threat, shown by the team's reduced scepticism. Rotation of senior personnel and an independent engagement quality review reduce the threat. No non-audit service, threat of pressure or promotion of the client's position is described.

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