threats

Hai Neeru,

Intimidation threat arises when the auditor is forced or threatened by the assurance client or the interested party to give an untrue opinion on the financial statements they are auditing.

Advocacy threat arises when the auditor acts as an advocate for or against the client’s position or opinion, or even act as an agent to promote the client’s business.

Intimidation is like a forceful act implied on the auditors whereas advocacy is done by the auditors for personal benefits.

Examples for intimidation.
Removal of auditor from assignment due to disagreement regarding the application of accounting standards.
Threat to reduce fees by the assignment client if the scope of the audit is not reduced.
Threat of intimidation due to the personal relationship between the auditor and the assurance client director.

If your are the auditor of ABC Company, and while auditing you found out that the application of the IAS standards are not complied with, which, if rectified would affect the going concern of the business, and even after you recommend for the changes, the client threatens you of reducing your fees or removing you from the assignment, and continue the audit the way it is to provide them with a favourable opinion on their financial position. It is intimidation or threatening.

Examples for advocacy
An assurance team member acts as an advocate in the client’s legal proceedings.
An audit team member involved in corporate financial dervices like dealing in financial securities or shares of a client or underwriting or selling a client’s shares on behalf of them.

Say XYZ Company which you are auditing had filed in a legal case against one of their customer, DEF Company for recovery of debt and you go to the court argueing in favour of or being a witness for your client, XYZ Co. by providing evidence, then this is advocacy.

It is said that the position of a company secretary can lead to an advocacy threat because, the duties of the company secretary includes maintaining records and registers, ensuring compliance with regulations and advising on matters of corporate governance.

Hope this clarifies your doubt. If I have missed anything or made a mistake please excuse and forum friends do correct it too.

You are right Neeru. On behalf as well as against the client too.
Say if you, as an auditor have knowledge of your clients details and say a friend or relative of yours have filed a suit against this client. The information which you obtained via professional work would benefit this friend and you turn out to go against your client in the court is also advocacy.

In short, not only in favour of your client but also against your client advocacy arises.

No mention dear the forum itself is to help each other the way anyone and everyone can from which ever part of the world they are in.