You are an audit senior of Charles & Co and have been allocated to the audit of Bill Co (BC), a listed company that has been an audit client for eight years and specializes in manufacturing musical instruments. Linda was the audit engagement partner for BC and as she had completed seven years as the audit engagement partner, she has recently been rotated off the audit engagement. The current audit partner, Sasha Goodyear, has suggested that in order to maintain a close relationship with BC, Linda should undertake the role of independent review partner this year. In addition, BC has requested that Linda assist them by attending their audit committee meetings, as a non-executive director has recently left the company. BC has also asked Sasha and the other partners at Charles & Co to help them in recruiting a new non-executive director. The total fees received by Charles & Co for last year equated to 16% of the firm’s total fee income. The current year’s audit fee has not yet been confirmed, but along with taxation and other possible non-audit fees, the total income from BC this year could be greater than for last year. Last year’s audit fee was being paid monthly by BC, but no payments have been made for the last three months. The audit manager for BC has just announced that he is leaving Charles & Co to join BC as the financial controller.

i. Identify and briefly explain FIVE ethical threats which may affect the independence of Charles & Co’s audit of BC.

ii. For each threat, explain how it might be reduced to an acceptable level.

Answer rating: 100% (QA)

The ethical dangers to the independence of Charles Cos audit of Bill Co are as follows based on the analysis and evaluation of the abovementioned case ... View the full answer