Self-Interest Threat in Auditing

Last time, I have shared to you the 5 threats to Compliance with Fundamental Principle in auditing. Now. I am going to elaborate more on the first threat to auditing which is self-interest.

Self-interest threat occurs when a firm or a member of the engagement team could benefit from a financial interest in , or other self-interest conflict with a client. The nature and significance of the threats may differ depending on whether they arise in relation to the provision of services to a financial statement audit assurance client or a non-assurance client.

Examples of circumstances that may create this threat include, but are not limited to:

  • A direct financial interest or material indirect financial interest in an assurance client. 
  • A loan or guarantee to or from an assurance client or any of its directors or officers.
  • Undue independence on total fees from an assurance client. 
  • Concerns about the possibility of losing the engagement. 
  • Having a close business relationship with an assurance client. 
  • Potential employment with an assurance client. 
  • Contingent fees relating to assurance engagements. 

Next entry will be about Self-review threats.  I hope you have learned something new. Keep on visiting my blog!

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