d) It has been suggested that the most important matter affecting the credibility of the auditor is that of 'independence'. Required: Comment on the following situations in the context of the independence of the auditor, showing me clearly the principles involved: (i) The audit manager in charge of the audit assignment of Kamau and Co. holds 1,000 Sh. 10 ordinary shares in the company [total shares in issue - 100,000). The audit partner holds no shares. (ii) The audit fee receivable from Jupiter Co, a private company is Sh.'| 00, 000. The total fee income of the audit firm is Sh. T00,000. (iii) The audit senior in charge of the audit of Pesa Bank Co has a personal loan from the bank of Sh. 2,000,000 on which she is currently paying 13% interest. (iv) The audit partner is responsible for two audit assignments, Equator Co and Treetop Co. Equator Co has recently tendered for a contract with Treetop Co for the supply of material quantities of goods over a number of years. Treetop Co has asked the audit partner to advice on the matter. [ 3 Marks) e) Assume you are the auditor of my company (Majengo ltd], a listed company which distributes materials to the construction industry from eight depots in the south of the country, and you are currently finalizing the audit for the year ended 31 March 2023. Your audits tests have proved satisfactory with the exception of the following four matters. 1. The physical inventory count sheets for one of the depots were lost before they were made available to you, and you have not been able to confirm the inventory quantities and values for this depot by alternative methods. The directors have valued this part of the inventory at Sh. ?5,000 and this figure is included in the overall inventory valuation of Sh. 640,000. 2. Included in trade receivables, which total Sh. 580,000, is a debt amounting to Sh. 45,000 from a customer who went into liquidation on 15 June 2023. You have ascertained from the quuidator that your client is unlikely to receive a distribution. The income statement for the year shows a pretax profit of Sh. 100,000 but the directors are not prepared to provide for this debt. The accounts of Majengo ltd do not contain a cash flow statement. 4. A substantial claim has been lodged against the company by a major customer. The matter is fully explained in the notes to the accounts, but no provision has been made for legal costs or compensation payable as it is not possible to determine with reasonable accuracy the amounts, if any, which may become payable. The directors have received legal advice which appears to be reliable in indicating that the claim can be successfully defended. Required: Explain how the above items will influence the auditor's report you will issue. (8 marks) F\" Once more I'm so proud of you my grandson! daughter and wish you all the best in your studies. Now and again I will be bothering you with more inquiries on this ever changing business world. Yours faithfully, Loving Grandfather Required: Respond to your grandfather's letter (30 Marks)