Self Review Threat

Self-review threat: This may occur when a previous judgment needs to be re-evaluated by the chartered accountant responsible for that judgment.

• The discovery of a significant error during a re-evaluation of the work of the chartered accountant in practice
• Reporting on the operation of financial systems after being involved in their design or implementation
• Having prepared the original data used to generate records that are the subject matter of the engagement.
• A member of the assurance team being, or having recently been, a director or officer of that client
• A member of the assurance team being, or having recently been, employed by the client in a position to exert direct and significant influence over the subject matter of the engagement
• Performing a service for a client that directly affects the subject matter of the§ assurance engagement

Mr.A has recently joined a firm of Chartered Accountants. The firm intends to depute him on the audit of  ABC Company. Prior to joining the firm, Ahmed had been providing accounting and taxation services to ABC Company for many years, in the capacity of a consultant.

Ans. The previous provision of accounting and taxation services to ABC Company and long association of Mr. A with ABC Company will create self-review and familiarity threat. Significance of threats needs to be evaluated and if threats are other then clearly insignificant, safeguards need to be applied to reduce the threats to an acceptable level.

In case Mr.A is included in the Audit engagement the related safeguards may include:

• involving an additional chartered accountant to review the work done by Mr. A or otherwise advise as necessary.
• independent internal quality reviews.
• If the threats are significant, Ahmed should not be part of the assurance engagement team.

For more about threats click on the following Links of auditorforum.com:

Advocacy threat with examples and related safeguards

Intimidation threat with examples and related safeguards

Self Interest Threat to Auditor and related Safeguards

Familiarity Threat to auditor and related Safeguards

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