Acca aaa s21 Notes

September 2021 to June 2022 exams
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3. Threats to the fundamental principles
Threats to compliance with the fundamental principles arise from 
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Self-interest
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Self-review
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Advocacy
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Familiarity
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Intimidation.
Note also there are management threats, where the auditor performs managerial functions for the 
client. These are not a separate category, but covered under several of the above, such as self-interest, 
familiarity and advocacy.
Where such threats exist, the auditor must: 
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Eliminate
the circumstance that creates the threat(s); or 
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Apply 
safeguards
, where available, to reduce the threats to an acceptable level (see s.4); or
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Decline
or end the specific professional activity.
3.1. Self-interest threats
Self-interest threats may arise from the following:
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Financial interests
– the provisions of the Code consider who holds the interest, whether the 
interest is direct or indirect and materiality. Firms, members of audit teams and immediate 
family members cannot hold direct or material indirect financial interests in audit clients. 
However, safeguards may be applied where a close family has such an interest.
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Close business relationships
– cannot be entered into unless immaterial and insignificant to 
both the firm and the client or is management.
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Family and personal relationship
– the existence and significance of any threat depends on 
the individual’s role in the audit team, the role of the individual within the client and the 
closeness of the relationship. 
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