Fundamental Principles of code of ethics is put forward by IFAC to bind auditors around the world to achieve objectives of engagement effectively and also providing users of financial statements with reasonable assurance and making them responsible for other aspects of the profession. Auditors have to abide by the requirements of code of ethics. Code of ethics which are also known as fundamental ethical principles include honesty or integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

However, during the practice while carrying requirements of engagement, auditors may face or they expect to face such situations when they will not be able to fulfil ethical requirements. Such obstructions are called threats to fundamental principles. Although threats can make many different shape but broadly they can be classified in FIVE categories: (a) Self-interest; (b) Self-review; (c) Advocacy; (d) Familiarity; and (e) Intimidation.

Illustrate any three threats to fundamental principles that might be encountered by an Auditor with appropriate instances in about 150 words each.

· You are required to mention the threat and explain it.

· Explain the situation in which the threat may arise.

· Justify the reason for the threat relevant to the situation mentioned

Answer rating: 100% (QA)

A threat to personal gain If the auditor is selfinterested there is a risk a financial stake in the company whether direct or indirect For a large fee ... View the full answer