Question

Which of the following is an example of a familiarity threat to independence?

		a bank account held with the client.
		performing services for the client that are then assured.
		both a and b.
		a former partner of the assurance firm holdings a senior position with the client.

Answer 1

Option d.

a former partner of the assurance firm holdings a senior position with the client

A familiarity threat exists if the auditor is too personally close to or familiar with employees, officers and directors of the client company.

Other options - Analysis

a.Bank account held with the client - it may not be a threat because these are commercial and arms length transactions

b.Performing services for the client that are then assured - this is self review threat