Marie encounters the following situations in doing the audit of a large auto dealership. Marie is not
Question:
Marie encounters the following situations in doing the audit of a large auto dealership. Marie is not a partner.
1. The sales manager tells her that there is a sale (at a substantial discount) on new cars that is limited to longestablished customers of the dealership. Because her firm has been doing the audit for several years, the sales manager has decided that Marie should also be eligible for the discount.
2. The auto dealership has an executive lunchroom that is available free to employees above a certain level.
The controller informs Marie that she can also eat there any time.
3. Marie is invited to and attends the company’s annual holiday party. When presents are handed out, she is surprised to find her name included. The present has a value of approximately $200.
REQUIRED
Use the three-step process in the independence conceptual framework to assess whether Maria’s independence has been impaired.
a. Describe how each of the situations might threaten Marie’s independence from the auto dealership.
b. Identify a safeguard that Marie’s firm could impose that would eliminate or mitigate the threat of each situation to Marie’s independence.
c. Assuming no safeguards are in place and Marie accepts the offer or gift in each situation, discuss whether she has violated the rules of conduct.
d. Discuss what Marie should do in each situation.
Step by Step Answer:
Auditing The Art and Science of Assurance Engagements
ISBN: 978-0134613116
14th Canadian edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones