1. BDO Seidman's attorneys pointed out correctly that professional standards do not prohibit auditors and client personnel from being "friends." At what point do such relationships result in violations of the auditor independence rules and guidelines? Provide hypothetical examples to strengthen your answer.

2. According to court testimony, on 20 July 1995, Drew Bergman recommended to HMI's board of directors that Mei-ya Tsai be hired as the company's chief accounting officer (CAO). One week later, BDO Seidman issued its audit report on HMI's 1995 financial statement. Under presently existing professional standards would this situation have presented an independence "problem" for BDO Seidman? Defend your answer.