Self interest threat

When asking about questions it would be helpful to identify them – name/exam session – and what is the source (ACCA/Kaplan/BPP) – then my responses can also be of help to other students who might be searching for an answer to the same query 🙂

This is what it says in the Code:

“A self-interest threat might be created if a SIGNIFICANT part of fees is not paid before the audit report for the following year is issued. It is generally expected that the firm will require payment of such fees BEFORE such audit report is issued …

… The requirements with respect to loans and guarantees might also apply to situations where such unpaid fees exist …

… Examples of actions that might be safeguards to address such a self-interest threat include:
• Obtaining partial payment of overdue fees.

… When a significant part of fees due from an audit client remains unpaid for a long time, the firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the client; and
(b) Whether it is appropriate for the firm to be re-appointed or continue the audit engagement.”

In the real world – audit firms are not charities – and have to make money like any other business – so if client’s can’t/won’t pay are they worth having? (Or course you can’t say that to the examiner!)

You’re welcome!