Responses and safeguards

In this lesson

1. 0:00 Responses and safeguards to audit threats
2. 0:44 Mitigating versus eliminating threats
3. 1:17 Self-interest threats and fee dependencies
4. 3:23 Responding to self-interest threats
5. 4:40 Self-review threats from non-audit services
6. 5:30 Managing self-review threats appropriately
7. 6:48 Advocacy and intimidation threats
8. 7:31 Intimidation threats and appropriate responses
9. 9:12 Familiarity threats and staff rotation
10. 10:53 Identifying threats in practice questions

About this lesson

You'll discover why responses differ for standard entities versus public interest entities, and see how real audit scenarios map to threat categories. This is essential knowledge for the Audit and Assurance (AA) paper and forms part of your understanding of professional ethics in auditing. The lesson breaks down each threat type with concrete examples. Self-interest threats arise from fee dependency, share ownership, or gifts; self-review threats emerge when auditors perform non-audit services like bookkeeping; advocacy threats occur when firms act as client advocates; intimidation threats include dismissal or litigation pressure; and familiarity threats develop from long-term relationships or personal connections. For each, you'll learn the appropriate response—whether that's fee discussions with audit committees, using separate teams within your firm, rotating staff, or in some cases, declining the work entirely. A key distinction runs throughout: public interest entities face stricter rules. For example, audit fees cannot exceed 15% of firm revenue over two consecutive years, bookkeeping services are completely prohibited, and engagement partners must rotate every seven years with mandatory cooling-off periods. The lesson closes with a practical worked example where you categorise real risks, reinforcing how to spot threats in your own audit files and apply the right safeguard.

Duration: 13m