Actual or threatened litigation
Self interest
Intimidation
Judgement will be compromised due to losing of
the client as they already sued by the client
If the firm sued on the client then firm should
withdraw from the audit engagement
If the individual team member sued on the client
then member should be removed from the audit
team
If the case is not significant then engagement will
be proceed and quality control review should be
reviewed by the independent partner of the firm
who are not involved in audit team to asses that
whether the judgement are reasonable .
Gift and hospitality
Self interest threat will be arise as he will not find
the error in the f/s so the judgement will be
compromised due to the finaicnal interest and
auditor will not be seems independent .
Fimilarity threat will arise as judgement will
compromized as the gift and hospitality will
develop the close relationship with the client
The auditor should politely decline the offer of the
gift and hospitality as it is not allowed by the rule
and regulations .
Compensation and evaluation
Self interest threat will arise . auditor will prefer the
own interest rather then the client interest
therefore if the auditor partner selling the non
assurance service to client then the auditor
judgement will compromised due to financial
interest .
Fee dependence
Self interest threat will ari se as auditor judgement
will compromised due to financial interest . and
and auditor will not find error in the f/s due to fear
of losing the client
Intimidation threat will also arise as there may be
actual or preceived pressure by the client to not
report error .
Referral fee or commission
Self interest threat will arise as the auditor
judgement will compromised due to the financial
interest .
Overdue fee
Self interest threat will be arise as he will not find
the error In f/s due to recover the overdue fee
therefore the auditor objectivity will be
compromised
Intimidation threat will also arise as the auditor
judgement will compromised due to actual or
perceived pressure
they should evaluate the nature, value,frequency ,
,timing and intention of the offer before accepting
or declining it
auditor may only accept the gift if it is trivial and no
intention to bribe .
Auditor partner will not allowed to selling the non
assurance service to client .
But the auditor manager has allow to selling the
non assurance service to client but the QCR should
be reviewed by the independent partner of the firm
who are not involved in the audit team.
This fee should be disclouse to client’s those charge
with governance and pre issuance review and post
issurance review should be conducted of the audit
work carried out
Firm should disclose the client any referral fee or
commission and should obtain the written consent
from the client for the commission arrangement
Discuss with the management a recovery plan for
the overdue fee and agreed upon the repayment
schedule
Contingent fee
Self interest threat will arise as the auditor will not
make adjustment In the f/s [profit ] that will lead to
reduction in profit and also reduction in the audit
fee .and they prefer the own interest rather then
the client interest .objectivity will also be
compromised due to the financial interest
Advocacy threat will also arise as the auditor will
not be seems as independent .
Service as director
Self interest threat will be arise as he will not find
the error in the f/s therefore the auditor objectivity
will compromised and auditor will be in position to
prefer his own interest rather then the client
interest .
Self review threat will also be arise . as the he will
not find the error in f/s while checking his own
work and would not report on them .
Long association
Self interest threat will be arise .auditor would not
be seem as independent . he will not find the error
in the f/s in order to keep earning that routine
money .therefore the auditor objectivity will
compromised .
The fimilarity threat would arise .
Auditor may not be objective .he may be too
symphathetic to the client information due to her long
association
Recent service with audit client
Self review threat will arise . auditor oibjectivity will
be compromised due to recent service with audit
client he will not find the error in f/s while checking
his own work and will not report the error on
them.will not able to give an objective opinion .
Fimilarity threat will arise as auditor objectivity will
compromised due to close relationship and there
may be too symphatic to the client mgt information
.
Self interest threat will arise as the auditor in
position to serve his own interest rather then the
client interest therefore the objectivity will
compromised due to the long assocaiton . and will
not find the error from the old work
Auditor should politely decline the offer of
contingent fee because level of fee should be based
on the assurance that provided and not on the
profit before tax
auditors should not enter into contingent fee
arrangements for non-assurance services provided
to assurance clients, as this creates a significant
self-interest and advocacy threat. They should also
disclose and obtain consent from relevant parties
before accepting any contingent fee arrangements
for other services
The auditor should politely decline the offer of
service as director as it is not allowed .
Auditor should not be retain as independent
review partner he need to complete the cooling off
period which is 5 years
If the rotation is not possible due to genuine reason
then then auditor should tell the client those
charge with governace and QCR should be
reviewed by the independent partner of the firm
who are not involved in the audit team
The team member should removed from the audit
team if he worked at the client in the year being
audited at the position to exert significance
influence over the subject matter .
Temporary staff assignment
It may arise the advocacy threat as there will be
appearance that the auditor will taking the client
side and promoting the client .
Management threat is only arise when the auditor
is involved in the management decision making
process .
Self review threat will arise as the auditor would
work on the f/s and he will unable to remain
objective while checking his own work
Fimilarity threat will be arise as the auditor is too
symthatic to client mgt information . he will not be
seems as independent and objectivity will
comromixed due to close relation with client
Employement with client
Self interest .he will not find the error in f/s due to
offer therefore the auditor objectivity will
compromised.
Fimilarity threat will arise as the judgement will be
compromised due to the close relationship
between the auditor and team member that are
trained by the auditor .
Family or personel relationship
Self interest threat will arise . the auditor
judegment will be compromised due to the close
family relationship and will not indentify or report
the error in the f/s
Fimilarity threat will arise as the auditor is too
sympathetic while checking the work of close
relationship at the client
Intimidation threat .
Loan and gurrentee
Self interest . The team member may be unable to
remain objective if the loan are given on the favourable
term
Business relationship
Self interest .judgement compromised due to the
financial interest .
Intimidation threat . judgement compromised due
to the actual pressure .
If the staff is request then make ensure that it is
only for the short period of the time and second
staff will not take part in the magt decision making
and audit client is responsible for the directing and
supervising the activities of the personnel .
If the seconded staff is already sent then
The team member should not be part of the audit
aspecially when the year he worked on the client as
temporary staff assignment
QCR .
If the auditor partner only joined the client after
the 12 month .
For the other member . to make ensure that there
is no significant conection remain with the firm and
individual and should modify the audit , assign
individual to audit team who has sufficient
experience in relation to the individual who has
joined the client and QCR by the independent
partner
If considering the job offer
Then should removed from the audit team
QCR of the significant judgement should be
conducted .
The auditor should removed from the audit team if
the relation with senior person at the client with
influence over the f/s .
The term of the loan should be checked if these are
normal term then no safeguard is necessary if the
loan are favourable term then team member
should be removed form the audit team and QCR of
their work should be conducted
This is the material business relationship therefore
it is not allowed
Conflict of interest
There is no ethical threat will arise .only the auditor
objectivity will be compromised
Second opinion
The self interest threat will arise as the auditor
judgement will compromized due to earn fee
second opinion assignment accept without basis
Lowballing
Self interest threat will arise . the auditor may
compromized on the quality of the audit due to low
fee
Recuritment
Self interest
This reccuriting can be used to firms interest rather
than the client interest so objectivity can be
compromised
Assistence in tax dispute resolutions
Advocacy threat .Auditor independence will be
compromised if they represent the client in a dispute
Both client should notify that the he would be
acting as auditor and get the written conent of both
client
Firm should assign the diff team with the diff
engagement partner and team member for both
client
Auditor should obtain the confidential agreement
signe by all member of both client .
QCR should be conducted to asses whether the
judgement are reasonable .
With the client permision , the auditor should
obtain information from the existing auditor and
Ensure the same set of he fact given as existing
auditor.and contact the eixtsing audiotr why they
give the qualified opinion
Allowed but the audiotr should follow the rule and
regulation and should not compromized on the
quality and standard and QCR of their work should
be conducted.
Auditor can help in recruiting but cannot negotiate
on the client behalf nor can make the final decision
Politely decline the offer of service as there is no
safeguard that reduce the threat to an acceptable
level
tCWG of the client should be informed of all ethical threat ans safeguard has been used by the auditor
[everysafequard ]
Self interest
threat will arise when the auditor is prefer the own interest rather then the client interest .so the
auditor judgement will compromised due to financial or other interest
1. Shareholder interest [mean when the auditor find error in its f/s then auditor should report it to
the shareholder ]
2. Potential shareholder interest {may be will buy share in future ]
3. Own interest
Self review
Will arise when the auditor review their own work on the f/s .and give an opinion on them . auditor will
not be independence as he will not find the error in the f/s while checking his own work .and will not
report these error to client
Fimilarity
Will arise when the auditor is too symthatic to client or mgt information . auditor will not be seem
independence and judgment will compromised due to the close relation to the client or employee .the
auditor should maintain the professional skepticism throughout the audit
Advocacy
Will arise when the auditor is taking the client’s side and promoting the client .and auditor will no be
seems independent .
Intimidation
Will arise when client management put pressure or threaten to auditor therefore auditor objectivity
and independence will be compromised
Judgement will be compromised due to actual or perceived pressure by the client