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Familiarity threat to independence
Familiarity threat to independence. Usually, their familiarity leads them to become too trusting of the client and can cause them to make biased decisions. Two new Frequently Asked Questions (FAQs) issued by the AICPA Professional Ethics Division provide nonauthoritative guidance for the effects on independence when senior personnel have been on an attest engagement team for a The familiarity threat is when an auditor is familiar with his or her client. Issue The familiarity threat is when an auditor allows their familiarity with the client to threaten their independence. Three threats come up more often than others in the event of a claim: familiarity, self-interest, and self-review. ABC Company has been audited by the same auditor for over 10 years and the auditor regularly plays golf with the CEO and CFO of ABC Company. 4. The AICPA Code of Professional Conduct (code) currently provides guidance on evaluating threats to members’ compliance with the “Integrity and Objectivity Rule” (ET sec. 001)1 regarding the The framework defines, and identifies the goal of, auditor independence. 001 and ET sec. This familiarity deteriorates their independence to perform an audit and further influences the auditor’s decision impacting the transparency of the audit. . Example. 100. Familiarity Threat. 2. A familiarity threat exists if the auditor is too personally close to or familiar with employees, officers, or directors of the client company. 1. The model for standard setters is based on three key steps: Identify threats to the auditor’s independence and analyze their significance. Evaluate the effectiveness of Auditors face constant threats to their independence, often without realizing that a threat exists. 4.
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