ACCA Advanced Audit and Assurance (AAA) Practice Exam

The impact of long-term relationships with an audit client is associated with which threat?

1. Advocacy threat

2. Intimidation threat

3. Familiarity threat

4. Self-review threat

The correct answer is: Familiarity threat

The familiarity threat arises from long-term relationships with audit clients. As auditors gain a deeper understanding of their clients over time, they may become too comfortable, which can potentially compromise their objectivity and independence. This sense of familiarity can lead auditors to overlook or underestimate misstatements and issues that may arise during an audit because they might unconsciously align more closely with the client's perspectives, assuming that the client operates with integrity and sound practices. In contrast, advocacy, intimidation, and self-review threats represent different types of challenges to auditor independence. The advocacy threat pertains to the auditor's role in promoting a client’s position or interests, potentially impairing objectivity. The intimidation threat relates to situations where the auditor feels pressured by the client or other external factors, which may hinder their impartiality. The self-review threat occurs when an auditor is auditing their own work, leading to a potential conflict of interest. Each of these threats can impact the effectiveness of the audit, but the specific concern with long-term client relationships is primarily tied to the familiarity threat.