ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following is a factor that can increase the familiarity threat?

1. Hiring external consultants

2. Long tenure of the audit team with the client

3. Changing accounting standards

4. Frequent rotation of audit partners

The correct answer is: Long tenure of the audit team with the client

The long tenure of the audit team with the client is a significant factor that can increase the familiarity threat in an audit context. When auditors spend an extended period working with the same client, they are likely to develop close relationships with the client's management and staff. This familiarity can lead to a less objective viewpoint when assessing risks and the validity of financial statements. Such relationships might create pressure to conform to the client's expectations or diminish the auditor's skepticism, which is a fundamental quality of effective auditing. In a situation where auditors are too familiar with a client, they may overlook critical issues or fail to question the client's assumptions rigorously, consequently impacting the integrity of the audit process. Other options do not inherently increase the familiarity threat in the same manner. For example, hiring external consultants can actually provide independent perspectives and mitigate familiarity, while changing accounting standards typically involves educating the audit team rather than increasing familiarity with clients. Frequent rotation of audit partners is specifically designed to alleviate familiarity threats by ensuring that new partners bring fresh perspectives and independence to the audit process.