Circumstances which may lead to self interest threat to fundamental principle of code of ethics.

Self interest threat this is threat which arise when the accountant or the audit firm has the financial interest or other interest in audit client. Typically, this means that the accountants decisions may be influenced by self-interest  and the accountant will therefore not act with objectivity and independence. For example if the auditor have shares in client he may not be willing to issue bad opinion or conclusion for fear of adversely affecting the value of his shares.



The following are circumstances which could give rise to self-interest threat to auditor:

Incentive based or contingent fee arrangement;

Concern over employment security;

Close personal or business relationship;

Undue dependence of fee from client;

Financial interest, loans and guarantee;

Holding financial interest in the client or jointly holding financial interest with client

Auditor discovering a significant error when evaluating the results of previous professional services performed by member of the audit firm.

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: