Economics · Auditing
According to professional ethical codes (such as the IESBA/ACCA Code of Ethics), which of the following scenarios describes an independence threat that arises from an audit firm performing an additional lucrative assurance review engagement for an existing audit client, specifically relating to an economic dependency or self-interest threat?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1If total fees from the client exceed 5% of the firm's total fees, the firm must immediately decline the engagement without further safeguards
- 2The lucrative nature of the fees from the review engagement creates a self-interest threat, making the audit team less inclined to request adjustments for fear of losing the client✓
- 3The review engagement creates a self-review threat because the firm will audit its own conclusions during the financial statement audit
- 4The firm is strictly prohibited from providing any non-audit or additional assurance services to an audit client under all circumstances
Correct answer
The lucrative nature of the fees from the review engagement creates a self-interest threat, making the audit team less inclined to request adjustments for fear of losing the client
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