When Joe Girardi, CA tried to collect last year's audit fees, he was told that he would receive the fees for the previous year and the current year upon finishing this year's work and issuing a "clean" audit opinion. This was non-negotiable and he was told that if he did not want to go along with it, the client would get another auditor. When he decided to leave his client, what threat to his independence did he mitigate?

Question

Quizplus · Accepted Answer

By refusing to go along with the client's demand and leaving the engagement, Joe Girardi mitigated the self-interest threat to his independence. This threat arises when an auditor's financial or other personal interests create a conflict of interest with the client, and it can impair the auditor's ability to exercise objective and impartial judgment. By standing firm and refusing to compromise his independence, Joe Girardi demonstrated his commitment to upholding professional ethics and standards.

When Joe Girardi, CA Tried to Collect Last Year's Audit