What is Advocacy Threat?
Advocacy threat Definition: Advocacy threat occur when members promote a position or opinion on behalf of a client to the point that subsequent objectivity may be compromised.
Example: Acting as an advocate for an assurance client in litigation or dispute with third parties.
This may occur when a chartered accountant promotes a position or opinion to the point that subsequent objectivity may be compromised.
- Promoting shares in a listed entity when that entity is a financial statement audit client.
- Acting as an advocate on behalf of an assurance client in litigation or disputes with third parties.
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Circumstances which may give rise to advocacy threats for members include:
- commenting publicly on future events.
- situations where information is incomplete or where the argument being supported is against the law.
- promoting shares in a listed company which is also an audit client.
- acting as an advocate for an assurance client in litigation or dispute with third parties.
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Safeguards: The safeguards might include:
- Consider the appropriateness or necessity of modifying the assurance plan for the assurance engagement;
- Assigning an assurance team that is of sufficient experience in relation to the individual who has joined the assurance client;
- Involve an additional chartered accountant who was not a member of the assurance team to review the work or advise as necessary; or
- Quality control review of the assurance engagement
- Ensuring that the individual concerned is not entitled to any benefits or payments from the firm unless these are made in accordance with fixed predetermined arrangements. In addition, any amount owed to the individual should not be of such significance to threaten the firm’s independence.
- Ensuring that the individual does not continue to participate or appear to participate in the firm’s business or professional activities.
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For more practicing questions and answers related to threats and safeguards in real life situations explore auditorforum.com. We are keen to know your views in comments. Links for threats on Auditorforum.com are following
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Self Review Threat with examples and real life situations[wpipa id="616"]
