Which of the following situations is a potential self-interest threat?Group of answer choicesAn audit partner of a listed audit client has been invited to attend the Rugby Seven's tournament in England by a director of the client.The audit team is preparing to carry out its 2021 audit for Company ABC and the audit client management wanted to meet the entire audit team.The audit partner owns a some shares in Qantas as part of their superannuation portfolio.The audit client has asked the audit partner to attend a meeting with the Australian Taxation Office, who are questioning the client's Taxes Paid last year.
Question
Which of the following situations is a potential self-interest threat?Group of answer choicesAn audit partner of a listed audit client has been invited to attend the Rugby Seven's tournament in England by a director of the client.The audit team is preparing to carry out its 2021 audit for Company ABC and the audit client management wanted to meet the entire audit team.The audit partner owns a some shares in Qantas as part of their superannuation portfolio.The audit client has asked the audit partner to attend a meeting with the Australian Taxation Office, who are questioning the client's Taxes Paid last year.
Solution
A self-interest threat occurs when the personal interest of an auditor or audit firm conflicts with its professional responsibilities towards the audit client.
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An audit partner of a listed audit client has been invited to attend the Rugby Seven's tournament in England by a director of the client: This situation could potentially create a self-interest threat. The audit partner may feel obligated to the director for the invitation and this could compromise their objectivity in conducting the audit.
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The audit team is preparing to carry out its 2021 audit for Company ABC and the audit client management wanted to meet the entire audit team: This situation does not necessarily create a self-interest threat. It is common for audit client management to meet the audit team. However, the auditor should ensure that such meetings do not compromise their independence or objectivity.
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The audit partner owns some shares in Qantas as part of their superannuation portfolio: This situation could potentially create a self-interest threat if Qantas is an audit client of the audit partner. The audit partner's financial interest in the client could compromise their objectivity and independence in conducting the audit.
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The audit client has asked the audit partner to attend a meeting with the Australian Taxation Office, who are questioning the client's Taxes Paid last year: This situation does not necessarily create a self-interest threat. However, the auditor should ensure that their role in such meetings does not compromise their independence or objectivity.
So, the situations that present a potential self-interest threat are the first and the third.
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