What threats to independence are created when a contingent fee is charged by a firm in respect of an assurance engagement?
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Show What kind of threat will be raised from contingent fees?The TF is of the view that performing an engagement for a contingent fee for an audit client creates a self-interest threat in that it puts the firm in a position of wanting the same outcome as the client.
What threat to independence may be created if fees due from an assurance?290.216 A self-interest threat may be created if fees due from an audit client remain unpaid for a long time, especially if a significant part is not paid before the issue of the audit report for the following year. Generally the firm should require payment of such fees before the audit report is issued.
What are the key threats to auditor independence?Five Threats to Auditor Independence. Self-Interest Threat. A self-interest threat exists if the auditor holds a direct or indirect financial interest in the company or depends on the client for a major fee that is outstanding. ... . Self-Review Threat. ... . Advocacy Threat. ... . Familiarity Threat. ... . Intimidation Threat.. What is an example of self interest threat?Self interest threat
Examples include: When the auditor or a member of their family owns shares in a client. They would directly benefit from increases in client profits and would be reluctant to raise any concerns that could adversely affect the performance of the client.
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