Threats Arising From Financial Matters (5)

Question 1

What are the contingent fees?

Answer 1

Fees calculated on a pre-determined basis relating to outcome of a transaction or result of services performed.

Question 2

What threat to contingent fees create?

Answer 2

A self-interest threat

Question 3

Why are no safeguards acceptable for contingent fees?

Answer 3

As they are not allowed for audit services.

Question 4

When can contingent fees be permitted?

Answer 4

For non-assurance work provided that adequate safeguards are implemented

Question 5

What threats does accepting gifts and hospitality from an audit client cause?

Answer 5

Self-interest
Familiarity
Intimidation threat

Question 6

How can acceptance of gifts from client create a self-interest threat?

Answer 6

Because the firm/individual may feel obliged to give a favourable opinion

Question 7

Which threat can hospitality from clients give rise to?

Answer 7

A familiarity threat

Question 8

Safeguards to gifts?

Answer 8

Gifts and hospitality should not be accpeted unless value is trivial and inconsequential