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

Vantor Co's accountant discovers that the finance director has used an unsupported 12% growth assumption in an impairment test, which avoids a $6 million impairment and keeps profit above a market forecast. Which threat to the fundamental principles is most clearly present for the finance director?

The most clearly present threat is self-interest. The finance director benefits from meeting market forecasts and avoiding a $6 million impairment, so that interest may bias the growth assumption. Familiarity, advocacy and intimidation do not describe the director's own motive.

  1. AFamiliarity threat
  2. BSelf-interest threatCorrect
  3. CAdvocacy threat only
  4. DIntimidation threat only

Explanation

The finance director has a financial or reputational interest in meeting market forecasts, and that interest may influence judgement in the impairment assumptions, which is a self-interest threat. Familiarity arises from close relationships, and advocacy from promoting a client's position. Intimidation would be the threat faced by the accountant being pressured, not the source of the director's motive.

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