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Hi,
There is undue dependence on any audit client or group of clients;
1) Why would the objectivity of the external auditor be threatened, or appear to be threatened and why is the threat important?
It’s basically a self-interest threat.If a large part of the firm in question’s income is coming from a particular audit client then a firm may be or seen to be too dependant on this income and therefore not independently minded enough to carry out an objective audit of client for fear of losing client.It may not wish to in against client’s wishes when gathering evidence and testing controls and it may be less inclined to issue anything other than unmodified audit report for fear of losing clients audit income in future years.
Thank you, your explanation helped a lot. It is in my view that smaller sized audit firms would be the ones more susceptible to the self-interest threat in this case.
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