Page 362 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Remuneration Interest: A professional accountant participating in incentive compensation arrangements
offered by the employing organization.
Gift Benefits: A professional accountant being offered a gift or special treatment from a supplier of the
employing organization.
Asset Interest: A professional accountant having access to corporate assets for personal use.
Self-review Threats
Assessing After Giving Consultancy: A professional accountant assessing accounting treatment for a business
combination after a feasibility study for the purchase decision.
Advocacy Threats
Altering Prospectus: An accountant could potentially alter prospectus data to secure better financing terms.

Familiarity Threats
Family Member doing financial Reporting: A professional accountant is in charge of the financial reporting
of their employer, and a close or immediate family member who also works for the organization influences
decisions that affect the financial reporting.
Long Tenure: A professional accountant maintains a long-term relationship with individuals who have a
significant impact on business decisions.
Intimidation Threats
Dismissal Threat: A professional accountant or their immediate or close family member is threatened with
dismissal or replacement due to disagreements about the application of an accounting principle or the way
financial information is reported.
Influence Attempt: An individual tries to sway the decision-making process of the accountant, particularly in
relation to the awarding of contracts or the application of an accounting principle.
Other Threats: In professional or business contexts, unique situations can challenge adherence to key
compliance principles. These threats, which defy easy classification, necessitate that public practice accountants
always stay vigilant.

(CNO-PE.380) Evaluation of Threats:
Assessment: Conditions, Policies and procedures (At Firm/Employer) can influence the assessment of
compliance threat levels with fundamental principles.
Acceptable Level: An acceptable level is one where a professional accountant, using the reasonable and
informed third party test, would likely conclude compliance with fundamental principles.
Reasonable and informed third party test: This test involves the accountant considering if another party
would likely reach the same conclusions. The test is conducted from the viewpoint of a reasonable and informed
third party, considering all known or reasonably expected facts and circumstances at the time of conclusion.
Qualification of Third Party: Accountant himself can apply this test or go to third Party for Opinion The third
party doesn't need to be an accountant but should have relevant knowledge and experience to impartially
evaluate the appropriateness of the accountant's conclusions.

(CNO-PE.400) Addressing Threats
Not an acceptable level: If threat is of unacceptable level, then it must be addressed by the professional
accountant to either eliminate them or reduce them to an acceptable level.
Elimination: Eliminate the circumstances, interests, or relationships causing the threats.
Safeguards: The accountant can apply safeguards to reduce the threats to an acceptable level.
Declination: In some cases, the accountant may need to decline or end the specific professional activity.
Appropriate Action: The appropriate action to eliminate threats will depend on the specific facts and
circumstances of each situation.

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