What does a self-review threat in audit services indicate?

A self-review threat in audit services indicates that the auditor is involved in creating the subject of the audit. This situation arises when an auditor is tasked with auditing a financial statement or component of it that they had a significant role in preparing or influencing. It raises concerns over the objectivity of the auditor, as their judgment may be impaired when reviewing their own work. Thus, there is a heightened risk that the auditor may not be sufficiently independent in their assessment, unintentionally favoring their previous decisions or corrections in their audit findings.

This scenario emphasizes the importance of maintaining strict boundaries between preparation and auditing functions to ensure the integrity of the audit process. By identifying such threats, the auditor can take steps to mitigate the risk of bias, perhaps by bringing in an independent third party to conduct the audit. Recognizing and addressing self-review threats is a key part of ethical audit practice to uphold public confidence in the audit profession.