A review of clients of the auditing firm of Juny & Pranil (J&P) revealed that there was a potential breach of the independence requirements of APES110 in the case below.

Your client is a fast growing company and now has become by far your largest audit client. During the past year you have only provided the service of financial report audit. Your client’s manager has approached you and asked if you could decide on the new computer system to be installed.

Required

(i) Does a potential threat to audit independence exist in the circumstances (Yes/No)?

(ii) If your answer to part (i) is yes, identify the single most significant type of potential threat and recommend a safeguard, if any, that could reduce or remove the threat. Alternatively, if your answer to part (i) is no, give reasons why no threat exists.

Answer rating: 100% (QA)

Given Scenario is that Your client has now become your largest audit client During the past year you ... View the full answer