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Other services that the audit firm may provide to the audit client include: institution of
internal controls; and preparation of financial accounts. Audit firm auditing the same
audit client may result in the threat of Self review and Self interest.

The threat of Self review results when the external auditor is asked by the auditee to
examine and judge the service or system of controls that he provided or instituted
himself. The Self interest threat is as a result of the interest that the audit firm has in
maintaining its relationship with the auditee with respect to the provision of the other
services. These threats may lead the external auditor to compromise his adherence
to the professional ethics of Independence and Objectivity.

The safeguard that the audit firm may employ is to form two(2) whereby one provides
the other services and the other takes charge of the audit assignment. When it is
impossible to have two teams, then, the audit assignment may be subcontracted to
another audit firm.

2. The auditee being a major client and also engaged in money laundering may put the
external auditor in a dilemma. The ethical principle of Confidentiality may be
threatened if appropriate safeguards are not taken.

Self interest threat may result when the auditor not wanting to lose the client, will not
disclose the illegal activity of the client. The external auditor may also have financial
interest in the business of the major client or use the information to blackmail the

The appropriate safeguard to take is to report the illegality to the appropriate public
authority and also to resign from the audit assignment.

3. The audit firm, its partners or senior staff having relations with key position holders of
the audit client may cause the external auditor to comprise his adherence to the
principle of Objectivity and Independence.

The Familiarity threat results from the fact that the external auditor may be
sympathetic to the interest of the family relations; leading to bias reporting, conflict of
interest or undue influence.

To reduce this threat to the minimal level, the opinion or review of an independent
auditor may the sought, or an independent audit team should be used. To fully
eliminate the threat, the audit assignment should be subcontracted; rejecting the
assignment s the ultimate safeguard to use.

4. The audit fee of GH¢ 18,500 constitutes about 23.125% of the forecasted gross
annual practice fee. When the percentage of the recurring fee of the audit client to
the forecasted practice fee exceeds 15%, it amount to Undue dependence on the

When the external auditor finds himself in the position of being unduly dependent on
the client, the threat of Self interest may result. The principle of Objectivity and
Independence may be threatened because the auditor in order to maintain such a
major client may patronise the client, comprise his professional code of ethics or be
unduly influenced by the client.

The appropriate safeguard to use is to either increase the gross practice fee by
increasing the client base, or reduce the audit fee that is charged the client. The
external auditor may also consult with fellow auditors or the recognised supervisory

5. It is allowed for the auditor to provide other services to the auditee, but the
significance of the threat to be posed by the service must be evaluated. When the
firm supports in the reduction of the client’s tax liability, it constitutes more than just a
general other service that the firm can provide.

This situation may lead to the Advocacy threat where the auditor patronises the client
such that subsequent objectivity is compromised. The fundamental principle of
Integrity may not be adhered to because reducing tax liability can result in the
falsification of financial documents.

The auditor may rather advice the client to accept the tax liability and not to engage
in any manipulation of the financial accounts. The view of a colleague auditor or the
recognised supervisory body may be sought.