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Dear Mike,
Please help me understand why a recommendation to audit clients (e.g. recommending a IT software company) creates a self-interest threat? The audit clients do not have to use the company we recommend and all we make is a commission on the sale.
Is it because the client may perceive this as a ‘favour’ done on us because by accepting our suggestion we do earn a fee through the commission and they may use this coax us into not raising contentious issues? But then again if this were the case wouldn’t it create an intimidation threat?
Thank you
AlefiyahHi
Just noticed this and the fact that I had not replied to it – sorry.
No, not really. You’re correct in that it’s because we are earning a commission from the recommendation and therefore we may be inclined not to recommend the best but to recommend instead the ones that pay us an introductory commission
Not sure about your point about not raising contentious issues – it’s just a matter of us appearing make recommendations for the wrong reasons
But as the printed solution says: “However, if appropriate safeguards are in place, the referrals and receipt of commissions can continue.”
OK?
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