Financial Management and Assurance (FMA) Auditors has recently become the auditors of Arbo Ltd. While negotiating...
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Financial Management and Assurance (FMA) Auditors has recently become the auditors of Arbo Ltd. While negotiating the terms of the current year audh, Arbo has demanded that FMA reduces its fees significantly and has told FMA that they can gradually increase their audit fees over time if FMA staff "do as they were told". Arbo has also offered the Audit Partner an additional bonus of $50,000, contingent on FMA "upholding Arbo's interests" in the audit. The Audit Partner has agreed as this deal will mean that he personally maintains his client retention rate, which will enable him to earn his year-end bonus, and FMA its diversified client portfolio. In addition, the Audit Partner's wife owns shares in Arbo and he is hoping to assist her in her investment decisions. He has provided her with a summary of Arbo's earnings and performance information so that she can make a more informed decision when buying and/or selling Arbo shares. Required: Discuss and explain the threats to independence present in this case and the related ethical principles that are breached under APES110. Please be specific in your explanation and only include relevant principles and/or threats. (5 marks) Financial Management and Assurance (FMA) Auditors has recently become the auditors of Arbo Ltd. While negotiating the terms of the current year audh, Arbo has demanded that FMA reduces its fees significantly and has told FMA that they can gradually increase their audit fees over time if FMA staff "do as they were told". Arbo has also offered the Audit Partner an additional bonus of $50,000, contingent on FMA "upholding Arbo's interests" in the audit. The Audit Partner has agreed as this deal will mean that he personally maintains his client retention rate, which will enable him to earn his year-end bonus, and FMA its diversified client portfolio. In addition, the Audit Partner's wife owns shares in Arbo and he is hoping to assist her in her investment decisions. He has provided her with a summary of Arbo's earnings and performance information so that she can make a more informed decision when buying and/or selling Arbo shares. Required: Discuss and explain the threats to independence present in this case and the related ethical principles that are breached under APES110. Please be specific in your explanation and only include relevant principles and/or threats. (5 marks)
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Step 11 Threats selfinterest poses a threat This risk arises for example when an auditor has only on... View the full answer
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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