Mike has been asked to prepare report that analyses the potential acquisition of PQR Pty Ltd by his client Zen Ltd. Prior to conducting the analysis, Mike decide to verify the accuracy and completeness of the cash flow statement provided by PQR Pty Ltd for the year ended 30th June 2020. After reviewing a draft of his analysis, Zen Ltd's Chief Financial Officer has asked Mike to focus his attention on the sales and profitability of PQR Pty Ltd and avoid the distraction of cash flow reporting. Chief Financial Officer suggests that the acquisition will provide substantial future benefits to Zen Ltd and that confusing the board with cash flow issues would not be helpful to the acquisition or to the likelihood of Mike being asked to undertake similar engagements in Future.

Required-:

a) Two threats to Independence with a brief explanation.

b) Explain three Fundamental ethical principles at risk.

Answer rating: 100% (QA)

ANSWER i The auditing profession has threats that may compromise the independence and objectivity of the auditor Therefore it is usually important for ... View the full answer