PROBLEM 6 - Ethics and Auditor Independence (6 marks total) The following are separate independent) situations: Scenario #1: Charles Bingley has been the Engagement Partner on the audit of Darcy Ltd for several years. He plays golf with the CEO of Darcy Ltd every Sunday, and their families now regularly take their vacations together. Scenario #2: An audit client of CKH Partners, SuperFun Pty Ltd, are undergoing an IPO (Initial Public Offering). Their share issue is currently undersubscribed, so they ask CKH Partners to promote their shares to other audit clients. Scenario #3: KPZ Partners are completing their first audit of McLaren Estate Wines. Two members of the audit team attend the year-end inventory stocktake, which takes longer than expected, and finishes at 9pm at night. The Stock Manager of McLaren Estate presents the six winery staff performing the stocktake and the two audit team members with a bottle of wine each (valued at $50 per bottle), as a token of appreciation for staying so late. REQUIRED: Use the above information to answer questions 13 to 14 below. Q13: For each of the above scenarios, state what type of threat to the auditor's independence (if any) exists. (3 marks) Scenario #1: > Scenario #2: Self-Interest Self-Review Scenario #3: Advocacy Familiarity Intin ation No Threat Q14: For each of the three scenarios listed above, state your reasoning for your choice of threat type (or if no threat was chosen, why no threat exists). (3 marks) (Please enter your answer in column 2 of the template provided) 7 A B 1 c? S ! Scenario Explanation Number #1 #2 #3 PROBLEM 6 - Ethics and Auditor Independence (6 marks total) The following are separate independent) situations: Scenario #1: Charles Bingley has been the Engagement Partner on the audit of Darcy Ltd for several years. He plays golf with the CEO of Darcy Ltd every Sunday, and their families now regularly take their vacations together. Scenario #2: An audit client of CKH Partners, SuperFun Pty Ltd, are undergoing an IPO (Initial Public Offering). Their share issue is currently undersubscribed, so they ask CKH Partners to promote their shares to other audit clients. Scenario #3: KPZ Partners are completing their first audit of McLaren Estate Wines. Two members of the audit team attend the year-end inventory stocktake, which takes longer than expected, and finishes at 9pm at night. The Stock Manager of McLaren Estate presents the six winery staff performing the stocktake and the two audit team members with a bottle of wine each (valued at $50 per bottle), as a token of appreciation for staying so late. REQUIRED: Use the above information to answer questions 13 to 14 below. Q13: For each of the above scenarios, state what type of threat to the auditor's independence (if any) exists. (3 marks) Scenario #1: > Scenario #2: Self-Interest Self-Review Scenario #3: Advocacy Familiarity Intin ation No Threat Q14: For each of the three scenarios listed above, state your reasoning for your choice of threat type (or if no threat was chosen, why no threat exists). (3 marks) (Please enter your answer in column 2 of the template provided) 7 A B 1 c? S ! Scenario Explanation Number #1 #2 #3