ACCA Advanced Audit and Assurance (AAA) Practice Exam

What can result from perceived threats to objectivity within the audit team?

1. Improved ethical standards

2. Enhanced financial reporting

3. Compromised audit integrity

4. Stronger client relationships

The correct answer is: Compromised audit integrity

When perceived threats to objectivity arise within the audit team, the integrity of the audit itself can be compromised. Objectivity is a fundamental principle in auditing, and it requires auditors to maintain impartiality and avoid any influence that could affect their judgment or decisions. If auditors feel that their objectivity is threatened—due to personal relationships, financial interests, or other pressures—they may struggle to remain unbiased in their assessments. Compromised audit integrity can manifest in various ways, such as the potential for unqualified opinions being issued when there are issues that should be communicated, or overlooking significant risks because of the relationships involved. This undermines the reliability of the audit results and can have far-reaching consequences for stakeholders who rely on the auditor's work for assurance regarding the financial statements. In contrast, improved ethical standards, enhanced financial reporting, and stronger client relationships do not directly result from perceived objectivity threats; instead, these aspects might be seen as desirable outcomes that require a solid commitment to ethical practices and objectivity rather than threats to them.