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may i know why self interest threat arises by providing guarantee on bank loan ?
I can’t seem to figure it out how this can affect objectivity ?
You have to imagine the situation – you are an audit partner and your firm guarantees a $x bank loan – if the bank calls in the loan and the client cannot pay it – it is your firm that will be liable under the guarantee.
Can you be objective/unbiased in giving an audit opinion?
Imagine if there is some uncertainty about going concern – might you be tempted to not draw attention to it as you should (MURGC)? – or to not modify your audit opinion if the client does not adequately disclose it in the financial statements?
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