Acca aaa s21 Notes

3.4. Familiarity threats
Familiarity threats arise because of the close relationship between members of the audit team and the 
client. The close relationship can arise by friendship, family or through business connections. There is 
no general definition of what’s meant by close relationships, but if you were an auditor and your 
brother was the Finance Director of a client firm then there probably is a close relationship! If however 
the finance director was a remote cousin of yours, there might not be a close relationship. Note that 
there does not have to be any family or legal relationship: friendship can threaten independence and 
integrity.
Long association of senior personal creates a familiarity (and self-interest) threat. The Code requires 
that an engagement partner cannot serve a PIE client for more than 
seven years 
(the 'time-on' 
period). This is to prevent too close a relationship and friendship growing between the two parties. 
The problem is that when a close relationship does grow, objectivity and skepticism are more likely to 
be lost. After the time-on period, the 'cooling-off' period for an engagement partner is 
five 
consecutive years
. The cooling-off period for an individual responsible for EQCR (see Chapter 9) is 
three years
.
3.5. Intimidation
The final groups of threats are intimidation threats. These can deter the assurance team from acting 
properly.
Examples could be threatened litigation, blackmail, or there might even be physical intimidation, 
though it is to be hoped that that is rare. Blackmail could be more subtly applied . For example, if a gift 
or hospitality from a client were to be accepted, the possibility of that being made public would 
create an intimidation threat to objectivity.
4. Safeguards
Applying 
safeguards
may be a suitable response to address an identified threat. Other responses are 
to