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Sir,for PYQ Mar/June 2016 Q4(b) “Review of internal control”
Why design , implementation and maintenance of internal control(mgt responsibilities) by the auditor, the self-interest and familiarity threat would arise?
Thank you.Because the audit firm could be considered to be aligning its views and interests to those of management.
Can give an example for self-interest threat arise in this case? still not clear about it
Thank you.
Per the code:
Definition: Self-interest threat – the threat that a financial or other interest will inappropriately influence the professional accountant’s judgment or behavior.
For example, deciding which recommendations of the firm to implement will create self-review and self-interest threats.
If the auditor was allowed to implement internal controls it might choose the easiest or the cheapest or whatever is management’s preference – however unconscious, the auditor would be influenced.
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