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Hello Sir,
Hope you are well!
Can you please help me in the below question which is from BPP – Question starts as :
You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed
company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.
Question – In this isnt it is a self-interest threat if the daughter Zoe is on the board as well? And if not why ?
because as per my understanding self-interest threat is relating to personal relationshipI don’t have the BPP kit but yes – “Close family and personal relationships between the auditor and owners or directors of the company they are auditing” can result in a self-interest threat (see 3rd bullet of s.3.1 on page 20 of the notes). Self-interest mostly has some financial implication – so for example, as a director, Zoe may be in a position to influence the audit fee in the auditor’s favour.
But I would say it is first and foremost a familiarity threat – see s.3.4 on page 22. There doesn’t have to be any financial angle to a familiarity threat – the mere existence of the relationship could influence the auditor (e.g. in the scope of audit procedures).
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