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Objectivity is having an uncompromised mental attitude by an auditor when carrying out an audit assignment. Since an auditor is a professional, they are expected to comply with Ethical Standards for Auditors as stipulated in IAASA (Irish Auditing & Accounting Supervisory Authority) (2017). Independence is the auditor's capacity to execute an audit assignment without coercion by persons with a financial interest in auditing the company (IAASA, 2017).

Threats to independence and objectivity include:

Self-interest threat occurs when an auditor has a financial or other interest that deters them from taking action, which may affect that interest. Since the auditor cannot act objectively, the final audit report may mislead the stakeholders (IAASA, 2017).

Self-Review Threat: If an auditor performs non-audit work to an audit client, a review of that work during the audit amounts to self-review, which contradicts the auditor's objectivity (IAASA, 2017).

Familiarity threat occurs when an auditor audits for a client for consecutive years, leading to familiarity with the organization's operations and hindering management's viewpoints(IAASA, 2017).

Intimidation threat occurs when auditors execute the audit under fear and intimidation, reducing the independence and objectivity of the audit (IAASA, 2017).

Advocacy threat: Occurs when an audit firm promotes a client's interest and positions, leading to compromising audit independence and objectivity(IAASA, 2017).

There are several safeguards to reduce an auditor's objectivity and independence threat. These include the audit firms setting up a compliance department that oversees that the audit team's independence and objectivity are not compromised. Deploying policies and training staff on the importance of objectivity and independence will reduce exposure to threats (Latif et al., 2017). Rotational audit staff to reduce familiarity threat and to have a 2nd partner review audit files will deter these threats from occurring as they are detected in advance. 

References

IAASA. (2017). Ethical Standard For Auditors (Ireland). Iaasa.ie. Retrieved 14 January 2022, from https://www.iaasa.ie/getmedia/cc2cfaa6-ed87-4a1c-927a-af34c217b5b9/Ethical-Standard-for-Auditors-Ireland-Sept2017.pdf.          

Latif, A., Ariffin, B., Chye, K., & Harjito, D. (2017). Perceived Threats and Safeguards of Auditor Independence. Riset Akuntansi Dan Keuangan Indonesia, 5(2), 115-133. https://doi.org/10.23917/reaksi.v5i2.3593

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