Now let’s think about advocacy, as it is the threat that many of us struggle to understand. A familiarity threat is the threat that due to a long or close relationship with a client or employer, a professional accountant will be too sympathetic to their interests or too accepting of … c. Advocacy threats : This type of threat can occur when an accountant promotes the point of view of a client, for example by acting as a professional witness in a legal dispute. The partner would act as an advocate, like oh yeah its the Partner of a reputable … This circumstance is a clear example of the advocacy threat as the member would impair their independence in appearance, and possibly in fact, by promoting the shares of an audit client. Ghandar says to watch out for these six threats to SMSF auditor independence: 1. Advocacy threat, like the name suggests, is acting on behalf, and not as the management. The previous provision of accounting and taxation services to ABC Company and long association of Mr. A with ABC Company will create self-review and familiarity threat. Advocacy threat – CPAs promoting a client’s interest or position. Self-review threat These occur when the auditor has also prepared some of the accounting for the fund. Promoting the client's securities as part of an IPO or representing a client in U.S. tax court. Ethical threats apply to accountants - … This could be when the Partner is asked to join the negotiations of a client’s merger. Financial Self-Interest Threat. Advocacy. Ghandar says the vast majority of independence breaches are related to self-review threats. Significance of threats needs to be evaluated and if threats are other then clearly insignificant, safeguards need to be applied to reduce the threats to an acceptable level. ... DBA, is the George R. Husband Professor of Accounting at Wayne State University in Detroit. An ethical threat is a situation where a person or corporation is tempted not to follow their code of ethics. Advocacy threats when performing tax dispute, litigation or legal services With respect to professional accountants assisting in the resolution of tax disputes, litigation support services, or legal services, such services can create advocacy and self-review threats to a professional accountant’s objectivity. Adverse Interest Threat. d. Acting as an advocate for the client can reach the point where the objectivity of the accountant is compromised. ... A threat to replace the CPA or CPA firm because of a disagreement with the client over the application of an accounting principle. The threat that a member will promote a client or employer’s position to the point that his or her objectivity is compromised. Alternative words for advocacy are support, promotion, backing and sponsorship. Ethical threats and safeguards . Advocacy threat. Advocacy threat occurs when a firm or a member of the engagement team promotes, or may be perceived to promote an assurance client's position or opinion to the point that objectivity may, or may be perceived to be compromised.Such may be the case if a firm or member of the engagement team were to subordinate their judgement to that of the client. This may be because it’s not obviously ‘wrong’ and often stems from good intentions. An ethical safeguard provides guidance or a course of action which attempts to remove the ethical threat. Advocacy Threat. The principal threats that mandatory firm rotation is intended to address are familiarity and self-interest. Adverse interest threat. All very commendable but the issue is the degree of advocacy.