1: Rick Warner (Audit Partner at ABC LLP) and John Smith(MCC Finance Director) are good friends. Their children are on the same basketball team and often spend time socializing on the weekends together after the games.

Situation #2: Jamie Brown has been assigned as the Junior Auditor on the MCC March 31, 2020 financial statement audit engagement. Jamie Brown previously worked for MCC for 5 years a Financial Accountant. As part of his prior role with MCC, Jamie assisted with in a variety of roles and responsibilities in the Receivables, Payables and Inventory Management departments.

Situation #3: MCC opted to change the auditors for the current fiscal year due to disagreements with the prior auditors over an accounting error disagreement. John Smith (MCC Finance Director) has stated that they will not tolerate any disagreements on the application of accounting policies for the current fiscal. Further, John has also mentioned that he will not have much time to answer questions and therefore has advised that the auditors should limit their inquiries.


REQUIRED: 

For each of the situations listed above, indicate the specific threat to independence that could prevent ABC LLP from accepting Modern Chair Company (MCC) as an audit client. In addition, explain how the threat could affect independence. You will be marked as follows:  1 mark for each correct identification of independence threat.  2 marks for an in-depth analysis to explain how the threat could affect independence and audit engagement.


Use the following format to structure your response:  


Situation #          Threat to Independence            Explanation
     1
     2
     3

Answer rating: 100% (QA)

Situation Threat to Explanation Number Independence 1 Familiarity The auditor and the client T... View the full answer