Which situation most directly threatens an auditor’s independence?
Correct answer: C. The auditor owns a significant financial interest in the client
- A. The auditor reviews the client’s accounting policies
- B. The auditor requests supporting documents from management
- C. The auditor owns a significant financial interest in the client
- D. The auditor discusses audit findings with the audit committee
Explanation
A significant financial interest creates a direct self-interest threat because the auditor may benefit from the client’s financial results. Requesting records and communicating findings are normal audit activities and do not by themselves impair independence.
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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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