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Hi sir,
I have some question on the threat to ethics.
1. Why is the same audit firm auditing 2 competing clients will cause the threat to objectivity?
2. Why is the holding of client assets will result in a self-interest threat?
Thanks in advance for answering
“Objectivity – to not allow bias, conflict of interest or undue influence of others to
override professional or business judgments.” A conflict of interest may arise if two audit clients are competitors – because, for example, the audit firm will be privy to confidential (and potentially commercially sensitive information) about the clients or may be asked for advice that is relevant to their competitive positions. There is nothing “wrong” with having competing clients as long as adequate safeguards are put in place and both clients are aware of and consent to the services provided to the other client.Management alone is responsible for safeguarding a company’s assets. If the auditor were to hold assets of a client a self-interest threat to professional behaviour arises because the assets might be used by the firm.
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