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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Zeta & Co audits Harbor Ltd. The audit engagement partner, Lina, has led the audit for six years and has developed a close, friendly relationship with Harbor's finance director, who is increasingly accepted by her without challenge. Which threat is most directly created, and which action would best address it?

This is a familiarity threat, because long association and closeness lead the partner to accept management's views too readily. Rotating the engagement partner or having another senior professional review the work is an appropriate response; the other options address different threats.

  1. AFamiliarity threat; rotate the engagement partner or add a review by another senior professionalCorrect
  2. BSelf-review threat; withdraw from providing any non-audit services
  3. CIntimidation threat; report the finance director to the regulator
  4. DAdvocacy threat; disclose the relationship in the audit report

Explanation

Long association and a close relationship leading to excessive trust in management is a familiarity threat. Rotating the partner or having an additional professional review the work are suitable responses. A self-review threat arises from evaluating one's own work, and no intimidation or advocacy is described, so the other options address different threats.

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