1. Refer to the case study presented below
2. Required:
3. Prepare a report addressed to the Audit Partners, discussing the potential issues raised by the client management, and provide recommendations regarding the appropriate course of actionfor the auditor. The report should specifically include the following:
4. 1) An executive summary that outlines the purpose of the report, summary of the assessment of the ethical issues and recommendations made. ( 350 words) (2 Marks)
5. 2) For each issue:
6. Provide a brief (one or two sentences) summary of the most pertinent or key
7. considerations of the potential issue identified. (3 marks)
8. Identify and explain any possible threats to independence for DEL Partners that may arise from each issue (e.g. self-interest threat*). If the issue does not create any threats to independence, this should also be noted, and supported. (5 marks)

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c. Discuss the rules and regulations that are applicable to the issue (e.g. contained in Corporations Act or APES 110). Be specific in your answer in terms of both the source of rules (i.e. include reference to specific sections and/or sub-sections of the regulation in your answer, e.g APES 110 s290.158*) and in terms of what the rules stipulate about the issue you are discussing. These should include appropriate safeguards that could reduce these threats to an acceptable level, where relevant. (7 Marks)

d. Suggest recommendations to the Audit Partner on the course of action that DEL Partners should take. (3 marks)

*These examples are provided for illustration and may/may not be relevant to the case. Useful links:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=2ahUKEwi- iPDe_tblAhXJbSsKHRaPBMoQFjAAegQIAhAC&url=https%3A%2F%2Fwww.apesb.org.a u%2Fuploads%2Fhome%2F02112018000152_APES_110_Restructured_Code_Nov_2018.p df&usg=AOvVaw2xNBYgvGwnuJZCepe2WZ9b

SUGGESTED FORMAT FOR ANSWERS:

• You need to present your answers in a report format, and therefore are required to provide an executive summary as indicated above.
• You may include a brief introduction and conclusion, although this is not a necessary requirement.
• Please do not define the threats. Instead, ensure that you apply the threats and safeguards to the case information, and refrain from simply providing generic statements.
• It is our recommendation that you address each issue separately i.e. address parts a) to d) of requirement 2 for issue 1, and then repeat for the second and third issues respectively.
• You should make use of appropriate headings and sub-headings to structure your report. You may use dot points (however, you should still use full sentences within these points).

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CASE STUDY: VINEA LTD

Vinea Ltd has been an audit client of DEL Partners for the past five years. Vinea Ltd, an ASX listed company, is based in Townsville where it manufactures heavy duty mining equipment for use in mining extraction and processing. Vinea's end of financial year is 31 December, and DEL Partners is preparing to commence its sixth audit, which relates to the 2019 financial period. In preliminary discussions for the upcoming audit, the management of Vinea Ltd have identified several potential issues that may threaten auditor independence. As a result, you have been asked by the audit partner to examine and advise on these potential issues, which are summarized below.

Potential Issue 1: Partner rotation

Joel Becks has been the engagement partner on the Vinea Ltd's audit since they became an audit client. Joel is a specialist in the mining industry and intends to remain as review partner when the audit is rotated to a new audit partner. Another audit partner, Luke Bens, will take over from Joel as the engagement partner.

Potential Issue 2: Former audit partner working for client firm/Business relationship

The accounting department at Vinea Ltd reports to the Chief Financial Officer (CFO), Leah Adams, who is an ex-partner of DEL Partners. Leah took up the appointment as CFO for Vinea Ltd in November 2018, after spending two years in early retirement. During her last year at DEL Partners, Leah had been the review partner on the 2016 Vinea Ltd audit. Leah does not hold any financial interest in DEL Partners, having been paid out her capital on retirement. Further, Leah has not remained in contact with any of the remaining partners since her departure from the audit firm, with the exception of Luke Bens, whom she had mentored in his early career.

Potential Issue 3: Non-audit services - technical assistance

A significant amount of Vinea's revenue comes from international sales. As a result, Vinea makes extensive use of financial instruments to hedge their contracts. Management at Vinea have become aware that there is a new accounting standard AASB 9 Financial Instruments which will affect their disclosures in the following financial year. They have now asked DEL Partners to provide some guidance on the both the implications and the implementation of the new standard on their reporting.