Cliff Marsden Has Been an Audit Manager at Copeland

question 34

Multiple Choice

Cliff Marsden has been an audit manager at Copeland & Cahoon, CA's the past ten years. Two years ago he performed human resources and internal audit functions for 9 months while his client underwent a major restructuring. His firm has a policy of changing audit partners and managers every five to seven years. He is reluctant to take on the audit because he believes there is an independence threat. Which threat is in play?

• A) integrity threat
• B) familiarity threat
• C) self-review threat
• D) advocacy threat

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Definitions:

Financial Crisis

A situation where the value of financial institutions or assets drops rapidly, leading to a loss of confidence in the financial system, possible bank runs, and reduced lending and spending.

Adverse Selection

A market process in which unwanted results occur when buyers and sellers have asymmetric information, typically resulting in high-quality goods or services being driven out of the market.

Insured Drivers

Individuals who have obtained insurance coverage to protect against potential losses or liabilities arising from automobile accidents or incidents.

Moral Hazard

A situation in economics where one party takes more risks because they know another party bears the cost of those risks.