Blue-Sky External Auditors are working on the audit of Timber Company, a large company that specializes in
Question:
Blue-Sky External Auditors are working on the audit of Timber Company, a large company that specializes in wood and lumber products. During the course of the audit, it has been determined that a former audit manager of Blue-Sky is now employed with Timber Company. Based on this scenario, which of the following types of threats may exist?
A management participation threat may exist because the former employee occupies a role in the client's management.
A familiarity threat may exist because the former employee may have greater knowledge of the policies and practices of the external auditor.
An adverse interest threat likely exists because the former employee of the audit firm will now be placed in a position which will cause a conflict of interest.
An advocacy threat may exist because the interests of the former employee who now works for Timber Company may be misaligned with the interests of the external auditor.
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg