CA H is managing partner of HK & Co., a Chartered Accountant firm, having registered office at Delhi. With the annual task of reviewing whether…

Type of Threats to Independence S. No. Situation Threat to Independence (i) CA J, partner of the firm, performed statutory audit as well as non- audit engagement for Take Away Private Limited. Self-review threats (ii) CA M, partner of the firm, who has done income tax audit for M/s. Happy Associates where in CA M has material significant indirect financial interest. Self-interest threats (iii) The costs of air travel and stay accommodation of family members. of audit team for audit Chennai was borne by the client stationed at Chennai. Familiarity threats (iv) One of the clients, Chalk Limited, threatened to replace them as auditors because the audit team insisted to make provision for expected credit loss which the company was not willing to provide. Intimidation threats (v) CA N, partner of the firm, who audited NM Private Limited became arbitrator for dispute between NM Private Limited and one of its vendors. Advocacy threats (vi) CA N accepted the assignment of Tax audit (on behalf of firm) of TRF Industries. Management agreed to pay him contingent fee for tax audit. Self-interest threats When such threats exist, the auditor should – (1) Either desist from the task or eliminate the threat or at the very least, put in place safeguards which reduce the threats to an acceptable level. All such safeguards' measures need to be recorded in a form that can serve as evidence of compliance with due process. (2) If the auditor is unable to fully implement credible and adequate safeguards, then he must not accept the work.