An auditor should not accept a loan on favourable commercial terms from an audit client because of the threat to his or her independence. The threat would be a___________?
Correct answer: D. Self-interest threat
- A. Familiarity threat
- B. Self-review threat
- C. Advocacy threat
- D. Self-interest threat
Explanation
A favourable loan creates a financial interest in the client relationship, so the auditor may be biased in protecting that benefit. This is a self-interest threat, not a self-review, advocacy or familiarity threat.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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