Familiarity threats occur when, because of a close relationship, members become too sympathetic to the interests of others.
Circumstances which may give rise to familiarity threats for members include:
- where a member in a position to influence financial or non-financial reporting or business decisions has an immediate family member who could benefit from those decisions
- long association with business contacts influencing business decisions
- acceptance of gifts or preferential treatment, unless the value is clearly insignificant
- over-familiarity with the management of the organisation such that professional judgment could be compromised
- a former partner of the firm being a director or officer of the client or an employee being in a position to exert direct and significant influence over the subject matter of the engagement.
Familiarity threat occurs when a senior member of the audit team has worked on the same audit for several years. There is a risk that the individual will become too familiar with the audit client and its management, and may then be unable to take an objective view and make objective decisions concerning the audit.