What is the self-review threat in auditing?

The self-review threat in auditing refers to the situation where an auditor may have to evaluate the results of their own previous work when forming a judgment in the current audit engagement. This scenario can create a conflict of interest, as the auditor may unconsciously bias their judgment or findings based on prior assessments.

For instance, if an auditor has previously provided consulting services or prepared financial statements for a client, they may struggle to objectively assess the effectiveness of those services or statements during the audit due to familiarity or investment in the prior work. This threat poses a significant challenge to the independence and objectivity that is crucial for a credible audit process.

Understanding self-review threats is critical for ensuring that auditors maintain a high standard of integrity and impartiality in their work, thereby supporting the reliability of financial reporting.