Question

One of the threats to integrity and objectivity a CPA may encounter in business is the undue influence threat. Explain this threat. Looking at your own environment, provide an example of a scenario where this threat might occur and what you would do to address the threat.

Answer 1

The undue influence threat is when pressure or influence is exerted on a CPA to compromise their professional judgment and independence. An example is a CPA being pressured to manipulate financial statements. To address the threat, the CPA should prioritize ethics and communicate with management.

Step-by-step explanation:

The undue influence threat is one of the threats to integrity and objectivity that a Certified Public Accountant (CPA) may encounter in business. It refers to a situation where an individual or group exerts pressure or influence on the CPA to make decisions or take actions that compromise their professional judgment and independence.

An example of a scenario where the undue influence threat might occur is if a CPA working for a large corporation is pressured by senior management to manipulate financial statements to portray a better financial position than what actually exists. This could be done to attract investors or secure loans under false pretenses.

To address this threat, the CPA should prioritize ethical conduct and adhere to professional standards and codes of conduct. They should communicate clearly with senior management about the importance of maintaining integrity and objectivity. If the undue influence persists, the CPA should consider reporting the situation to the appropriate authorities or seeking guidance from professional organizations.