Final answer:
An advocacy threat can impair an auditor's independence when entering into a contingent fee arrangement or accepting a commission associated with an attest client. This type of threat aligns the auditor's interests with the client's, similar to how legal conflicts of interest can compromise a lawyer's duty, as seen in Glasser v. United States.
Option 4 is correct answer.
Step-by-step explanation:
An advocacy threat arises if entering into a contingent fee arrangement or accepting a commission or a referral fee associated with an attest client impairs independence. This specific type of threat to independence concerns the risk that a professional may become too closely aligned with the interests of a client, potentially compromising the objective and impartial stance that is required in attest engagements, such as audits or reviews. The principle behind this threat is closely tied to ethical standards within professional accounting and auditing practices.
The issue at hand is recognized within the broad ethical framework that governs auditors, where a key tenet is maintaining objectivity and avoiding any conflicts of interest that could impair professional judgment. The landmark case Glasser v. United States set a precedent in the legal field by establishing that a lawyer's conflict of interest due to simultaneous representation of codefendants violates the Sixth Amendment's Assistance of Counsel Clause. Although the context is legal, the principle of avoiding conflicts of interest is analogous to the stance required in financial attest engagements.
In both accountancy and law, professionals must be vigilant to prevent situations that could lead to conflicts of interest, as these can lead to biased decision-making or actions that are not in the best interest of stakeholders. In the context of attest engagements for accountants, accepting a contingent fee or commission from an attest client can create an advocacy threat by aligning the auditor's interests too closely with the client's outcomes, potentially leading to biased audit opinions or compromised integrity.