Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?
A)The PA's uncle owns the business that the PA is auditing.
B)For the last two years,the client could not pay their fees,so the PA created a loan agreement covering the fees,with the client paying 10% interest on the fees.
C)The PA has a small bank loan at normal business interest rates with the bank that his firm is auditing.
D)The PA has purchased a used car from one of the employees of the client.

Question

Quizplus · Accepted Answer

A self-interest threat arises when a PA could benefit financially from a decision or activity of the audit client. In option B, the PA creating a loan agreement with the client for unpaid fees introduces a financial dependency on the client, which could compromise the auditor's objectivity and independence.

Which of the Following Situations Would Be an Example of a Self-Interest