l3 : audit independence

Question 1

what is corporate governance?

Answer 1

system by which firms are controlled, directed and managed. important as protects shareholders interests and ensures directors are working for SH interests

Question 2

what are the five threats to the fundamental principles?

Answer 2

Familiarity threat
Advocacy threat
Intimidation threat
Self-interest threat
Self-review threat

Question 3

explain the familiarity threat.

Answer 3

arises when a long / close rs with a client can have an effect on judgement & objectivity. may become too sympathetic or accepting of their work.

Question 4

explain the advocacy threat.

Answer 4

relates to risk that accountant promotes a clients position to the point that the accountants objectivity is compromised. need value freedom.

Question 5

explain the self interest threat.

Answer 5

relates to risk that financial or other interest in a client will negatively influence accountants judgement

Question 5

explain the intimidation threat.

Answer 5

relates to risk that accountant is deterred from acting objectively due to actual / perceived pressure

Question 6

explain the self review threat.

Answer 6

arises when previous judgement is re-evaluated by same accountant responsible for that judgement.