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Hi please could you explain why a “management threat” infringes on the auditors independence?
Also how does it differ from an “advocacy threat”?
Many Thanks
Hello,
A management threat is where the auditor finds himself in the shoes of the management. The work that belongs to the management is being requested to be done by the auditor.
Eg, tax filing. The director can say that while you are examining the tax costs, why not file the tax returns as well?
This is not acceptable. Management threat creates a problem so severe that the audit cannot be continued objectively. There’s usually no safeguard to reduce the threat and should be declined.Advocacy threat, like the name suggests, is acting on behalf, and not as the management. This could be when the Partner is asked to join the negotiations of a client’s merger. The partner would act as an advocate, like oh yeah its the Partner of a reputable firm, the company is definitely worth going for.
I hope this helps
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