53.(a)JKL Co is a small firm of external auditors with a small number of clients.Almost 20%of its revenue comes from one client.The client still has not settled the invoice from the previous year's audit in the hope that this will strengthen their position in negotiating a lower price for this year's audit.
Which two of the following conflicts of interest exist in this situation?
A Self-review threat
B Advocacy threat
C Self-interest threat
D Familiarity threat
E Intimidation threat(2 marks)
(b)Are the following statements true or false?
(i)When dealing with ethical dilemmas ACCA students must follow ACCA's code of conduct.
(ii)Professional ethics should not be followed at the expense of contractual obligations.
(iii)There is a public expectation that accountants will act ethically.
(iv)A prospective audit firm quoting a significantly lower fee for assurance work than the
current auditors charge does not raise a threat of a conflict of interest.
53(a)C,E Because it is important for JKL Co to retain this client,due to significance of the revenue,
there is a self-interest threat here.The client is also looking to intimidate the auditors over
the fee negotiations.
(b)(i)True ACCA students and members must always follow ACCA's code of conduct.
(ii)False Professional ethics should be followed even if this is at the expense of a contractual
(iii)True The public expects all professionals to act in an ethical manner.
(iv)False This process is known as lowballing and raises a significant self-interest threat,
particularly if the firm want to offer more profitable non-audit services as well.