What is Intimidation threat in auditing?

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As the word intimidation means to frighten physically or mentally ultimately to gain undue advantage. As auditors’ job is act honestly to report on assertions made in the financial statements, auditors may face intimidation threat to induce them to report differently. Where code of ethics require auditors to act according to fundamental principles, it also provides recommendations on how to fight against threats that may obstruct auditor from fulfilling ethical requirements.

According to IFAC Code of Ethics intimidation threat occurs when auditors may be deterred from acting objectively by threats actual or perceived

So as said earlier for a threat to arise it does not necessarily have to explicitly expressed to auditor it may be perceived by an auditor by other’s actions and most of the time such threats in this profession are indirect. Although it may amount to physical threatening but mostly it is about hurting auditors professionally. For example:

  • by forced cancellation of contract by the client to deprive auditor to conduct subsequent audit thus indirectly hurting auditor’s revenues
  • by dragging auditor in case laws or threatening to do so in order to hurt his credibility in the eyes of current and potential other clients
  • by holding audit fee or the compensation for other work conducted by the auditor
  • by black mailing auditor for certain conduct that may be taken as professional misconduct on part of auditor or may seriously derogate auditor to act objectively
  • by hurting auditor’s financial interests e.g. by taking down auditor’s investments in entities where the other party can exercise influence
  • by giving physical threats to auditor’s family members, relatives or loved ones
  • by depriving auditor from basic needs at client’s premises
  • by lodging complain with authority that regulates auditors’ licencing, discipline or quality control

 

4 COMMENTS

    • Will write a detailed article explaining the safeguard for each very soon. Its a good question indeed. Keep them coming
      – Hasaan

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