Bakers Co is an audit client of Hinkley Innes, a firm of Chartered Certified Accountants. The firm
Question:
Bakers Co is an audit client of Hinkley Innes, a firm of Chartered Certified Accountants. The firm has had the audit of Bakers for 17 years and the fee represents 7% of firm income. Bakers are considering a major new project and have asked the firm if it would be happy to undertake some one-off consultancy work for the firm. It is possible that the fee income for this contract would represent 10% of that year's income for Hinkley Innes. The new business services partner, who heads up a new division of the firm, is keen to take on the work, as this would represent his best contract yet.
Scenario 2 Peter works in the purchasing department of Murphy Manufacturing Co. He has been instrumental in setting up control systems in the purchasing department as part of a recent risk management exercise. He has a poor relationship with his immediate supervisor, the Purchasing Director. Murphy Manufacturing has just advertised the post of trainee internal auditor. Peter is interested in the work that internal audits do, having liaised substantially with the department during the exercise of the recent control. No formal accountancy qualifications are required for the post because the successful candidate will be put through accountancy training. Peter has had a chat with the head of the internal audit concerning the post and is seriously considering making an application.
Required Discuss the threats and the safeguards to objectivity that could be implemented in the two situations given above.
