Write answers to each of the five (5) situations described below addressing the required criteria (i.e. 1 & 2) in each independent case. You may use a tabulated format if helpful having “Threats”, “Safeguards” and “Objective Assessment” as column headings.

Gary Monroe has been appointed as a junior auditor of Brilliant Chartered Accountants (BCA). One of his first tasks is to review the firm’s audit clients (all public interest entities) to ensure that independence requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His review has revealed the following:

(a) Kerry is a senior auditor and a member of the team auditing a long-standing client, Darcy Industries Limited. Darcy Industries has just announced a takeover bid for Blacklight Limited. Kerry’s wife Rebecca has a substantial shareholding in Blacklight.

(b) BCA has recently been approached by Windsurfing Limited (WL) to conduct its audit. Jeff Banks, an audit partner at BCA is being considered to lead the WL audit. The accountant at WL, Sasha Jackson is Jeff’s daughter.

(c) For the past three years, BCA has been the auditor of Fantastic Holidays Limited (FHL). Liam Neeson has been the audit partner on the FHL audit. To express sincerity towards BCA and Liam, and to maintain the good relationship in anticipation of another smooth audit, FHL has offered a complimentary 15-day holiday package voucher for four people to Fregate Islands in Seychelles for Liam’s family. All expenses, including accommodation and travelling costs, will be paid by FHL.

(d) Jason is a partner in BCA who provides audit services to Tasty Beverages Limited (TBL). Arnold is another partner is BCA who provides substantial non-audit services to TBL. Arnold’s wife Michelle is planning on purchasing significant shares in TBL.

(e) Blue Mining Limited (BML) is a major client of BCA. This is the third year that BML has contributed 17 percent of total audit fee revenue and 16 percent of the non-audit fee revenue of BCA. BML has not paid any of its fees for the past two years, citing cash flow problems. The partners at BCA have been reluctant to put any pressure on BML for outstanding fees, as BML is a high-profile client that they wish to retain For each of the independent situations above, and using the conceptual framework in APES 110 (Code of Ethics for Professional Accountants), answer the following questions:

1. Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified.

2. Provide an objective assessment of whether audit independence can be achieved.

Answer rating: 100% (QA)

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