B a self review threat c no threat to independence d

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b.A self-review threat.c. No threat to independence.d.A self-interest threat.ExplanationChoice "b" is correct. The self-review threat is the threat that an auditor or audit organization thathas provided nonaudit services will not appropriately evaluate the results of previous judgmentsmade or services performed as part of the nonaudit services when forming a judgment significantto an audit. The failure to evaluate the fairness of the data used for the actuarial valuation and thereasonableness of the liability valuation itself represents a self-review threat.Choice "c" is incorrect. Independence was likely compromised by a self-review threat.Choice "d" is incorrect. The self-interest threat is the threat that a financial or other interest willinappropriately influence an auditor’s judgment or behavior. Although the firm has a financialinterest in the service that they performed outside of the audit, the threat is more accuratelycharacterized as a self-review threat.
Choice "a" is incorrect. Familiarity threat is the threat that aspects of a relationship withmanagement or personnel of an audited entity, such as a close or long relationship, or that of animmediate or close family member, will lead an auditor to take a position that is not objective.The issue is not the familiarity with management, it is the inappropriate reliance on unauditedwork performed by the firm's consultants.Carlisle & Company is auditing the Town of Dunderhead in accordance with Generally AcceptedGovernment Auditing Standards (GAGAS) and has determined that no one on the city's staff iscompetent enough to maintain and close the accounting records of the city. Believing that he isperforming a service for his client, the audit manager takes possession of the books and records,posts transactions, develops trial balances and produces audited financial statements in time tofully comply with statutory filing requirements. The audit manager has created a threat toindependence identified by GAGAS that is defined as:

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Term
Spring
Professor
N/A
Tags
federal financial assistance, government auditing standards

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