Accepting on which an effective and successful working relationship

Accepting gifts or hospitality fromaudit client may create familiarity threats. Independent of auditor is impaired if gift and hospitality aresignificant and cannot be reduced to an acceptable level by the application ofany safeguard and the auditor should not accept such gift or hospitality. However,during festive events or any other occasion or for whatever reason, an auditclient may present a gift to the auditor as gesture of goodwill. Anotherexample, audit client treat the auditor to lunch during the audit in his roleas a host. But generally this is acceptable if the value is clearly unimportant,thus, it will not affected the independence of auditor.

Hospitality is an element of manybusiness relationships and can provide valuable chances for developing an understandingof the audited client’s business and for achievement the vision on which aneffective and successful working relationship depends. Therefore, the auditors’independent is not necessarily impaired as a result of accepting hospitalityfrom the audited client, provided it is sensible in terms of its regularity,its nature and its cost.             Inthe situations, the protections to be applied by auditors to ensure theirindependence is not compromised are relativity direct andnon-controversial.  The auditor gets tooclose or friendly with a client so actions may be biased to assisting thatclient because independent judgment is misplaced. To avoid familiarity threat,auditors should not audit clients where close family members work. Do notaccept gift from the company or director’s company and audit partners arerotated away from clients on a regular basis is another way to avoid thethreat.        3.

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2 Threatened or actual litigation Where legal action between an auditorand audit client is in progress, it seems most unlikely that the auditor willbe able to maintain objectivity in appearance will most certainly beimpaired.  For example, whether theclient has sued the auditor or the auditor has brought a case against theclient for matters such as dishonesty or overdue fees.  Threated or actual legal action is threat toself-interest and advocacy threat.

It is where legal action in relation toaudit or non-audit services takes place between the audit client and auditfirm. In such environments the audit firmwill be concerned with achieving a favorable outcome to the legal action ratherthan conducting the audit with an objective, fair state of mind of intellect.Furthermore, with the auditor and the client on against opposing sides, it seems unlikely that theclient’s management will feel likely to make full and limit revelation to theaudit firm. For self- interest, conflict between thepersonal interests of the auditor and the client because the auditor is temptedto obtain personal benefit rather than provide an appropriate service for theclient. Mitigate self-interest do not hold any financial interest.

For advocacy threat, the auditor is seemedto be promoting or supporting the client in some way, the auditor’s objectivitymay be comprised because they believes must always support the clients. To diminishadvocacy, auditor do not promote any sale of share and do not support theclient in court.