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CPA REVIEW SCHOOL OF THE PHILIPPINES
AT-8914
Manila
AUDITING THEORY
CPA Review
CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS IN THE PHILIPPINES
STRUCTURE OF THE CODE
PARTS
Part 1 - Complying with the Code,
Fundamental Principles and Conceptual
Framework
Part 2 – Professional Accountants in
Business (PAIBs)
APPLICABILITY
Applicable to all professional accountants (PA)
PAIBs include PAs engaged or contracted in an
executive or non-executive capacity in, for example:
✓ Commerce, industry or service.
✓ The public sector.
✓ Education.
✓ The not-for-profit sector.
✓ Regulatory or professional bodies.
Also applicable to PAPPs when performing
professional activities pursuant to their relationship
with the firm, whether as a contractor, employee or
owner.
Part 3 – Professional Accountants in
Public Practice (PAPPs)
Part 4 – International Independence
Standards
Applicable to PAIBs when performing professional
activities.
Applicable to PAPPs when performing professional
activities.
Part 4A – Independence for Audit and Review
Engagements
Part 4B – Independence for Assurance
Engagements other than Audit and Review
Engagements
COMPLYING WITH THE CODE
A. DIFFERENCES BETWEEN REQUIREMENTS OF THE CODE AND LAWS AND
REGULATIONS - A professional accountant shall comply with the Code. However, in the
case that laws or regulations preclude a professional accountant from complying with certain
parts of the Code, the laws and regulations shall prevail and the PA shall comply with all other
parts of the code.
B. DIFFERENCES IN ETHICAL REQUIREMENTS – In the event when a professional
accountant performs services in a country other than the home country and differences on
specific matters exist between ethical requirements of the two countries, the professional
accountant should apply the code of ethics with stricter requirements.
FUNDAMENTAL PRINCIPLES
A. INTEGRITY – to be straightforward and honest in all professional and business relationships.
B. OBJECTIVITY – Not to compromise professional or business judgments because of bias,
conflict of interest or undue influence of others.
C. PROFESSIONAL COMPETENCE AND DUE CARE – (1) To attain and maintain professional
knowledge and skill at the level required to ensure that a client or employing organization
receives competent professional service; and (2) to act diligently and in accordance with
applicable technical and professional standards.
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D. CONFIDENTIALITY – to respect the confidentiality of information acquired as a result of
professional and business relationships and, therefore, not disclose any such information to
third parties without proper and specific authority, unless there is a legal or professional right
or duty to disclose, nor use the information for the personal advantage of the professional
accountant or third parties.
E. PROFESSIONAL BEHAVIOR – To comply with relevant laws and regulations and avoid any
conduct that the professional accountant knows or should know might discredit the
profession.
CONCEPTUAL FRAMEWORK APPROACH
The environment and circumstances in which a professional account renders its services and
activities may create threats to compliance with the fundamental principles as previously
discussed. As such, the conceptual framework has been set out on the code to present
requirements on how to appropriately deal with these threats.
The conceptual framework specifies a three–step approach for PAs to:
1. Identify – threats to compliance with fundamental principles
2. Evaluate – the threats identified
3. Address - the threats by eliminating or reducing them to an acceptable level.
THREATS TO COMPLIANCE WITH THE FUNDAMENTAL PRINCIPLES
A. SELF-INTEREST THREAT – the threat that a financial or other interest will inappropriately
influence the professional accountant’s judgment or behavior.
B. SELF-REVIEW THREAT –the threat that a professional accountant will not appropriately
evaluate the results of a previous judgment made or service performed by the professional
accountant, or by another individual within the professional accountant’s firm or employing
organization, on which the accountant will rely when forming a judgment as part of providing
a current service.
C. ADVOCACY THREAT – the threat that a professional accountant will promote a client’s or
employer’s position to the point that the professional accountant’s objectivity is compromised.
D. FAMILIARITY THREAT – the threat that due to a long or close relationship with a client or
employer, a professional accountant will be too sympathetic to their interests or too accepting
of their work.
E. INTIMIDATION THREAT – the threat that a professional accountant will be deterred from
acting objectively because of actual or perceived pressures, including attempts to exercise
undue influence over the professional accountant.
SAFEGUARDS TO ADDRESS THE THREATS IDENTIFIED
Threats identified that are not at an acceptable level must be addressed in one of three ways:
1. Eliminating the circumstances, including interests or relationships, that are creating the
threats;
2. Applying safeguards, where available and capable of being applied, to reduce the threats
to an acceptable level; or
3. Declining or ending the specific professional activity.
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SAFEGUARDS THAT MAY ELIMINATE OR REDUCE THREATS
TO AN ACCEPTABLE LEVEL
1. Safeguards created by the profession, legislation or regulation.
• Educational, training and experience requirements for entry into the profession.
• Continuing professional development requirements.
• Corporate governance regulations.
• Professional standards.
• Professional or regulatory monitoring and disciplinary procedures.
• External review by a legally empowered third party of the reports, returns,
communications or information produced by a professional accountant.
2. Safeguards in the work environment.
• Firm-wide safeguards
• Engagement specific safeguards.
INDEPENDENCE
Independence of mind
The state of mind that permits the expression of a conclusion without being affected by influences
that compromise professional judgment, thereby allowing an individual to act with integrity, and
exercise objectivity and professional skepticism.
Independence in appearance
The avoidance of facts and circumstances that are so significant that a reasonable and informed
third party would be likely to conclude, weighing all the specific facts and circumstances, that a
firm’s, or a member of the audit or assurance team’s integrity, objectivity or professional
skepticism has been compromised.
MULTIPLE CHOICE QUESTIONS
1. The Code of Ethics for Professional Accountants in the Philippines is approved by ______
recommended for adoption by the _____.
A. BOA, PICPA
C. BOA, President of the Philippines
B. SEC, BOA
D. PICPA, BOA
2. Which of the following statements best explains why the CPA profession has found it essential
to establish ethical standards and means for ensuring their observance?
A. Vigorous enforcement of an established code of ethics is the best way to prevent
unscrupulous acts.
B. Ethical standards that emphasize excellence in performance over material rewards
establish a reputation for competence and character.
C. A distinguishing mark of a profession is its acceptance of responsibility to the public.
D. A requirement for a profession is to establish ethical standards that stress primarily a
responsibility to clients and colleagues.
3. The underlying reason for a code of professional conduct for any profession is
A. That it is required by congress
B. The need for public confidence in the quality of the service of the profession
C. That it provides a safeguard to keep unscrupulous people out
D. That it allows professional regulation commission to have a yardstick to measure deficient
performance
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4. How did the Code of Ethics define public interest?
A. A distinguishing mark of a profession is acceptance of its responsibility to the public.
B. The accountancy profession's public consists of clients, credit grantors, governments,
employers, employees, investors, the business and financial community, and others who
rely on the objectivity and integrity of professional accountants.
C. The collective well-being of the community of people and institutions the professional
accountant serves.
D. The standards of the accountancy profession are heavily determined by the public interest.
5. Which statement is incorrect regarding the Code of Ethics for Professional Accountants in the
Philippines?
A. The objectives as well as the fundamental principles are of a general nature and are not
intended to be used to solve a professional accountant’s ethical problems in a specific
case.
B. The code is divided into three parts; parts A B and C.
C. Part 1 applies to all professional accountants.
D. Part 3 applies only to those professional accountants in public practice.
6. Which of the following statements is incorrect?
A. Part 1 which includes the fundamental principles and the conceptual framework is
applicable to all professional accountants.
B. Part 2 sets out additional material that applies to professional accountants in business
when performing professional activities.
C. Part 2 shall not apply to individuals who are professional accountants in public practice
when performing professional activities pursuant to their relationship with the firm,
whether as a contractor, employee or owner.
D. Part 3 sets out additional material that applies to professional accountants in public
practice when providing professional services.
7. The Code of Ethics for Professional Accountants in the Philippines is applicable to professional
services performed in the Philippines on or after
A. June 15, 2019
C. December 31, 2018
B. June 30, 2019
D. December 31, 2019
8. Which of the following statements is incorrect?
I. Statement 1: The Code requires professional accountants to comply with the
fundamental principles of ethics.
II. Statement 2: The Code also requires them to apply the conceptual framework to identify,
evaluate and address threats to compliance with the fundamental principles.
III. Statement 3: Applying the conceptual framework requires exercising professional
judgment, remaining alert for new information and to changes in facts and circumstances,
and using the reasonable and informed third party test.
A. Only one statement is correct
C. All statements are correct
B. Only two statements are correct
D. All statements are incorrect
9. In order to achieve the objectives of the accountancy profession, professional accountants
have to observe a number of prerequisites or fundamental principles. The fundamental
principles include the following, except
A. Objectivity
C. Professional Behavior
B. Professional Competence and Due Care
D. Confidence
10. A professional accountant shall not knowingly be associated with reports, returns,
communications or other information where the accountant believes that the information
(select the exception):
A. Contains statements that are truthfully presented
B. Contains a materially false or misleading statement
C. Contains statements or information provided recklessly
D. Omits or obscures required information where such omission or obscurity would be
misleading
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11. Which of the following fundamental ethical principles requires a professional accountant to
act diligently and in accordance with applicable technical and professional standards?
A. Objectivity
C. Professional competence and due care
B. Professional behavior
D. Integrity
12. Which of the following is incorrect regarding confidentiality?
A. Professional accountants have an obligation to respect the confidentiality of information
about a client’s or employer’s affairs acquired in the course of professional services.
B. The duty of confidentiality ceases after the end of the relationship between the
professional accountant and the client or employer.
C. Confidentiality should always be observed by a professional accountant unless specific
authority has been given to disclose information or there is a legal or professional duty to
disclose.
D. Confidentiality requires that a professional accountant acquiring information in the course
of performing professional services neither uses nor appear to use that information for
personal advantage or for the advantage of a third party.
13. In compliance with professional behavior, when undertaking marketing or promotional
activities, a professional accountant shall not bring the profession into disrepute. A
professional accountant shall be honest and truthful and shall not make:
I. Exaggerated claims for the services offered by, or the qualifications or experience of, the
accountant;
II. Disparaging references or unsubstantiated comparisons to the work of others
A. I only
C. Both I and II
B. II only
D. Neither I nor II
14. Which of the following is not among the specified procedure in the conceptual framework in
Part A of the Code of Ethics for Professional Accountants?
A. Identify threats to compliance with the fundamental principles
B. Evaluate the threats identified
C. Use the third-party test
D. Address the threats by eliminating or reducing them to an acceptable level
15. The professional accountant should be constantly conscious of and be alert to factors that
give rise to conflicts of interest. When faced with significant ethical issues such as identifying
unethical behavior or resolving an ethical conflict, the professional accountant should do the
following, except
A. follow the established policies of the employing organization to seek a resolution of such
conflict.
B. review the conflict problem with the immediate superior if the organization’s policies do
not resolve the ethical conflict.
C. seek advice on a confidential basis with an independent advisor or the applicable
professional accountancy body or regulatory body to obtain an understanding of possible
courses of action.
D. report the matter to the Securities and Exchange Commission.
16. Which of the following will not create self-interest threat for a professional accountant in
public practice?
A. The possibility of losing a significant client.
B. Direct financial interest in the assurance client.
C. Undue dependence on total fees from a client.
D. Preparing the original data used to generate records that are the subject matter of the
assurance engagement.
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17. Familiarity threat could be created under the following circumstances except
A. A professional accountant accepting gifts from a client whose value is inconsequential or
trivial.
B. Senior personnel having a long association with the assurance client.
C. A director or officer of the client or an employee in a position to exert significant influence
over the subject matter of the engagement having recently served as the engagement
partner.
D. A member of the engagement team having a close or immediate family member who is a
director or officer of the client.
18. This threat to independence occurs when a member of the assurance team has recently
performed services for an assurance client that directly affect the subject matter information
of the assurance engagement (e.g., valuation services).
A. Self-review threat.
C. Self-interest threat.
B. Advocacy threat.
D. Familiarity threat.
19. If requested to perform a review engagement for an entity in which a practitioner has an
immaterial direct financial interest, the accountant is
A. independent because the financial interest is immaterial and, therefore, may issue a
review report.
B. not independent and, therefore, may not be associated with the financial statements.
C. not independent and, therefore, may not issue a review report.
D. not independent and, therefore, may issue a review report, but may not issue an auditor’s
opinion.
20. The threat that a professional accountant will be deterred from acting objectively because of
actual or perceived pressures from the client is known as
A. Intimidation threat.
C. Self-interest threat.
B. Familiarity threat.
D. Advocacy threat.
21. The following circumstances may create intimidation threats, except
A. Being threatened with dismissal or replacement in related to a client engagement.
B. Being pressured to reduce inappropriately the extent of work performed in order to reduce
fees.
C. Being threatened with litigation.
D. A member of the assurance team being, or having recently been, a director or officer of
the client.
22. The following circumstances may create self-interest threat, except
A. A professional accountant holding a financial interest in, or receiving a loan or guarantee
from, the employing organization.
B. A professional accountant participating in incentive compensation arrangements offered
by the employing organization.
C. A professional accountant having access to corporate assets for personal use.
D. A professional accountant determining the appropriate accounting treatment for a
business combination after performing the feasibility study supporting the purchase
decision.
23. Which of the following circumstances creates familiarity threat?
A. A PA being responsible for the financial reporting of the employing organization when an
immediate or close family member employed by the organization makes decisions that
affect the financial reporting of the organization.
B. A professional accountant having the opportunity to manipulate information in a
prospectus in order to obtain favorable financing.
C. A professional accountant having a long association with individuals influencing business
decisions.
D. A professional accountant or immediate or close family member facing the threat of
dismissal or replacement over a disagreement about the way in which financial information
is reported.
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24. The following circumstances create advocacy threats for a professional accountant in public
practice except
A. Promoting shares in an audit client.
B. Acting as an advocate on behalf of an audit client in litigation or disputes with third parties.
C. Acting as campaign manager for the president of a client who is running for a public office.
D. A member of the assurance team having a significant close business relationship with an
assurance client.
25. Examples of facts and circumstances that may create self-interest threats for PAPPs when
undertaking professional services are as follows (choose the exception):
A. Having a direct financial interest in a client
B. Quoting a low fee to obtain a new engagement
C. Having access to confidential information that might be used for personal gain
D. Issuing an assurance report on the effectiveness of the operation of financial systems
after implementing the systems
26. Which of the following circumstances creates self-review threat?
A. Having prepared the original data used to generate records that are the subject matter of
the assurance engagement
B. Promoting the interests of, or shares in, a client
C. Acting as an advocate on behalf of a client in litigation or disputes with third parties
D. Having a close or immediate family member who is a director or officer of the client
27. Which of the following circumstances most likely creates advocacy threat?
A. A director or officer of the client or an employee in a position to exert significant influence
over the subject matter of the engagement, having recently served as the engagement
partner
B. Lobbying in favor of legislation on behalf of a client
C. An audit team member having a long association with the audit client
D. Being threatened with dismissal from a client engagement or the firm because of a
disagreement about a professional matter.
28. Which of the following safeguards to eliminate or reduce threats to independence is provided
by the profession, legislation or regulation?
A. Policies and procedures that emphasize the assurance client’s commitment to fair financial
reporting.
B. Internal policies and procedures to implement compliance with firm policies and
procedures as they relate to independence.
C. Continuing professional development requirements.
D. Rotation of senior personnel.
29. Which of the following is an example of engagement-specific safeguards in the work
environment?
A. Advising partners and professional staff of those assurance clients and related entities
from which they must be independent.
B. Disclosing to those charged with governance of the client the nature of service provided
and extent of fees charged.
C. A disciplinary mechanism to promote compliance with the firm’s policies and procedures.
D. Published policies and procedures to encourage and empower staff to communicate to
senior levels within the firm any issue relating to compliance with the fundamental
principles that concerns them.
30. Fees charged for assurance engagements should be a fair reflection of the value of the work
involved. In determining professional fees, the following should be taken into account, except
A. The time necessarily occupied by each person engaged on the work.
B. The outcome or result of a transaction or the result of the work performed.
C. The skill and knowledge required for the type of work involved.
D. The level of training and experience of the persons necessarily engaged on the work.
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31. In the case of audit engagements, it is in the public interest and, therefore, required by the
Code that members of audit teams, firms and network firms shall be independent of audit
clients. Independence requires
A. Independence of mind only.
B. Independence in appearance only.
C. Both independence of mind and independence in appearance
D. Either independence of mind or independence in appearance
32. When the professional accountant determines that appropriate safeguards are not available
or cannot be applied to eliminate the threats to independence or reduce them to an acceptable
level, the professional accountant shall
I. Eliminate the circumstance or relationship creating the threats.
II. Decline or terminate the audit engagement.
A. I only
C. Either I nor II
B. II only
D. Neither I or II
33. Independence from the audit client is required
I. During the engagement period.
II. During the period covered by the financial statements.
A. I only
C. Both I and II.
B. II only.
D. Neither I nor II.
34. Financial interests may be held through an intermediary (for example, a collective investment
vehicle, estate or trust). When control over the investment vehicle or the ability to influence
investment decisions exists, the code defines that financial interest to be a/an
A. Direct financial interest.
C. Indirect financial interest.
B. Material direct financial interest.
D. Material indirect financial interest.
35. Holding a financial interest in an audit client may create a self-interest threat. The existence
and significance of any threat created depends on
I. The role of the person holding the financial interest.
II. Whether the financial interest is direct or indirect.
III. The materiality of the financial interest.
A. I and II only.
C. II and III only.
B. I and III only.
D. I, II, and III.
36. The concept of materiality is least important to an auditor when considering the
A. Effects of a direct financial interest in the client upon the auditor’s independence.
B. Decision whether to use positive or negative confirmations of accounts receivable.
C. Adequacy of disclosure of a client’s illegal act.
D. Discovery of weaknesses in a client’s internal control.
37. A direct financial interest or a material indirect financial interest in the audit client of a member
of the audit team or his immediate family member may create a significant self-interest threat.
Which of the following safeguards would be least likely considered to eliminate the threat or
reduce it to an acceptable level?
A. Discuss the matter with those charged with governance of the audit client.
B. Dispose of the direct financial interest prior to the individual becoming a member of the
audit team.
C. Dispose of the indirect financial interest in total or dispose of a sufficient amount of it so
that the remaining interest is no longer material prior to the individual becoming a member
of the audit team.
D. Remove the member of the audit team from the audit engagement.
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38. Jayson, CPA, was offered the engagement to audit W Corporation for the year ended
December 31, 2020. He had served as a director of W Corporation until December 31, 2018,
and his spouse currently owns 6,000 of the 100,000 outstanding share capital of W
Corporation. Jayson disassociated from W Corporation prior to being offered the engagement.
Moreover, the engagement does not cover any period that includes Jayson’s association or
employment with W Corporation. Under the code of ethics, Jayson should
A. Accept the engagement.
B. Let a partner from the same office accept and conduct the engagement.
C. Refuse the engagement because he had served as a director.
D. Refuse the engagement because of his spouse’s stock ownership.
39. A loan, or guarantee of a loan, to the firm from an audit client that is a bank or a similar
institution, would not create a threat to independence provided
I. The loan, or guarantee, is made under normal lending procedures, terms and
requirements.
II. The loan is immaterial to both the firm receiving the loan and the audit client.
A. I only
C. Both I and II
B. II only
D. Neither I nor II
40. When an immediate family member of a member of the assurance team is a director, an
officer, or an employee of the assurance client in a position to exert direct and significant
influence over the subject matter information of the assurance engagement, or was in such
a position during the period covered by the engagement, the threats to independence can
only be reduced to an acceptable level by
A. Where possible, structuring the responsibilities of the assurance team so that the
professional does not deal with matters that are within the responsibility of the immediate
family member.
B. Withdrawing from the assurance engagement.
C. Removing the individual from the assurance team.
D. Discussing the issue with those charged with governance, such as the audit committee.
41. Which of the following would not generally create a threat to independence?
A. The purchase of goods and services from an assurance client by the firm (or from a
financial statement audit client by a network firm) or a member of the assurance team
provided that the transaction is in the normal course of business and on an arm’s length
basis.
B. A partner or employee of the firm or a network firm serves as Company Secretary for a
financial statement audit client.
C. Determining which recommendations of the firm should be implemented.
D. Reporting, in a management role, to those charged with governance.
42. The following forms of assistance to a financial statement audit client do not generally
threaten the firm’s independence, except
A. Analyzing and accumulating information for regulatory reporting.
B. Assisting in resolving account reconciliation problems.
C. Authorizing or approving transactions.
D. Assisting in the preparation of consolidated financial statements.
43. As defined in the Code, “a valuation comprises the making of assumptions with regard to
future developments, the application of certain methodologies and techniques, and the
combination of both in order to compute a certain value, or range of values, for an asset, a
liability or for a business as a whole.” Which of the following threats may be created when a
firm or a network firm performs valuation for an audit client that is to be incorporated in the
client’s financial statements?
A. Advocacy threat
C. Self-review threat
B. Familiarity threat
D. Intimidation threat
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44. The following statements relate to the provision of taxation, internal audit or IT Systems
services to audit clients. Which is false?
A. Preparing calculations of current and deferred tax liabilities (or assets) for an audit client
for the purpose of preparing accounting entries that will be subsequently audited by the
firm creates a self-interest threat.
B. A self-review threat may be created when a firm, or network firm, provides internal audit
services to an audit client.
C. The provision of services by a firm or network firm to an audit client that involve the
design and implementation of financial information technology systems that are used to
generate information forming part of a client’s financial statements may create a selfreview threat.
D. The provision of services in connection with the assessment, design, and implementation
of internal accounting controls and risk management controls does not create a threat to
independence provided that firm or network firm personnel do not perform management
functions.
45. What threat to independence is created when the litigation support services provided to an
audit client include the estimation of the possible outcome and thereby affects the amounts
or disclosures to be reflected in the financial statements?
A. Self-review threat
C. Intimidation threat
B. Advocacy threat
D. Familiarity threat
46. The recruitment of senior management for an assurance client, such as those in a position to
affect the subject matter of the assurance engagement, may create the following current or
future threats to independence, except
A. Self-interest threat
C. Intimidation threat
B. Familiarity threat
D. Self-review threat
47. Which of the following threats to independence may be created when litigation takes place,
or appears likely, between the firm or a member of the assurance team the assurance client?
A. Self-interest or advocacy threat
C. Self-interest or intimidation threat
B. Advocacy or intimidation threat
D. Familiarity or self-review threat
48. The following statements relate to the provisions of the Code of Ethics that deal with the
professional accountant’s marketing of professional services. Which is false?
A. When a professional accountant in public practice solicits new work through advertising
or other forms of marketing, a self-interest threat to compliance with the principle of
professional behavior may be created.
B. The professional accountant should be honest and truthful when marketing professional
services.
C. Advertising and publicity are generally unacceptable.
D. When marketing professional services, the professional accountant should not make
exaggerated claims for services offered, qualifications possessed or experience gained.
49. Which of the following statements concerning publicity is incorrect?
A. A professional accountant may write a letter or make a direct approach to another
professional accountant when seeking employment or professional business.
B. Genuine vacancies for staff may be communicated to the public through any medium in
which comparable staff vacancies normally appear.
C. Professional accountants are prevented from providing training services to other
professional bodies, associations or educational institutions which run courses for their
members or the public.
D. In publications such as those specifically directed to schools and other places of education
to inform students and graduates of career opportunities in the profession, services
offered to the public may be described in a business-like way.
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50. A professional accountant in public practice is allowed to
A. Refer to, use or cite actual or purported testimonials by third parties.
B. Publish services in billboard (e.g., tarpaulin, streamers, etc.) advertisements.
C. Publish and compare fees with other CPAs or CPA firms or compare those services with
those provided by another firm or CPA practitioner.
D. Inform interested parties through any medium that a partnership or salaried employment
of an accountancy nature is being sought.
51. After evaluating the significance of the threat created by an actual or threatened litigation,
the following safeguards should be applied to reduce the threat to an acceptable level, except
A. Disclosing to the audit committee, or others charged with governance, the extent and
nature of the litigation.
B. If the litigation involves a member of the assurance team, removing that individual from
the assurance team.
C. Involving an additional professional accountant in the firm who was not a member of the
assurance team to review the work or otherwise advise as necessary.
D. Withdraw from, or refuse to accept, the assurance engagement.
52. When the total fees generated by an assurance client represent a large proportion of a firm’s
total fees, the dependence on that client or client group and concern about the possibility of
losing the client may create a/an
A. Self-interest threat.
C. Intimidation threat.
B. Self-review threat.
D. Advocacy threat.
53. What threat to independence may be created if fees due from an assurance client for
professional services remain unpaid for a long time, especially if a significant part is not paid
before the issue of the assurance report for the following year?
A. Advocacy threat
C. Intimidation threat
B. Self-interest threat
D. Self-review threat
54. What threats to independence are created when a contingent fee is charged by a firm in
respect of an assurance engagement?
A. Self-review and intimidation threats
C. Familiarity and intimidation threats
B. Self-interest and advocacy threats
D. Self-interest and self-review threats
55. The following statements relate to the provision of legal services to an audit client. Which is
incorrect?
A. The provision of legal services to an audit client involving matters that would not be
expected to have a material effect on the financial statements may create a self-review
threat.
B. Legal services to support an audit client in the execution of a transaction (e.g., contract
support) may create a self-review threat.
C. Acting for an audit client in the resolution of a dispute or litigation in such circumstances
when the amounts involved are material in relation to the financial statements of the audit
client would create advocacy and self-review threats so significant no safeguards could
reduce the threats to an acceptable level.
D. The appointment of a partner or an employee of the firm or network firm as General
Counsel for legal affairs to an audit client would create self-review and advocacy threats
that are so significant no safeguards could reduce the threats to an acceptable level.
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