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- May 11, 2020 at 12:04 pm
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.May 11, 2020 at 1:44 pmBecause the audit firm could be considered to be aligning its views and interests to those of management.
May 12, 2020 at 10:07 amCan give an example for self-interest threat arise in this case? still not clear about it
Thank you.
May 12, 2020 at 3:37 pmPer 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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