What type of threat arises from a financial interest in the client by the auditor?

The self-interest threat arises when an auditor has a financial interest in the client they are auditing. This situation can create a conflict of interest because the auditor may be inclined to act in their personal financial interest rather than maintaining objectivity and impartiality. For example, if an auditor holds shares in the client company or has other financial ties, they might be tempted to overlook issues or provide a more favorable audit opinion to protect their investment, potentially compromising the integrity of the audit process.

Understanding self-interest threats is crucial for maintaining ethical standards in auditing. Auditors are expected to remain independent, and any financial relationship with the client can impair that independence. This is why many auditing standards emphasize avoiding such relationships to ensure that the audit is conducted with integrity and free from bias.

In contrast, other types of threats mentioned—such as advocacy, intimidation, and self-review—pertain to different scenarios that might influence an auditor's objectivity but do not specifically stem from a financial interest in the client. For example, advocacy threats involve the auditor promoting the client’s interests, while intimidation threats relate to pressures exerted by the client. Self-review threats occur when auditors are in a position to audit their own work. Each of these threats poses its own risks to the audit