You are the first appointed external auditor of the Nailangi Exotic Apartment (NEA). The Company has...

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You are the first appointed external auditor of the Nailangi Exotic Apartment (NEA). The Company has recently completed a 10 storey building with 50 apartments near the Denarau area in Nadi. In order for the Company to sell all the apartments quickly, it provides a week of free stay in the apartment to the potential investors. The Company follows a procedure (selection criteria) to determine potential investors and only those investors are given the opportunity to stay in the apartment for a week at no cost. On the first day of the audit, the CEO of the Company approached you and informed you that they have already sold 5 apartments and they have also identified 15 potential investors who will be given a chance to stay in the apartment for a week at no cost to decide if they wish to purchase the apartments. The CEO has also asked you to promote the company's new project and the free stay scheme to your other audit clients. Required: Identify and explain if there is any threat to audit independence in the scenario? Your answer should refer to the Code of Ethics for Professional Accountants. (Max. Word limit -150 words) (5 marks) You are the first appointed external auditor of the Nailangi Exotic Apartment (NEA). The Company has recently completed a 10 storey building with 50 apartments near the Denarau area in Nadi. In order for the Company to sell all the apartments quickly, it provides a week of free stay in the apartment to the potential investors. The Company follows a procedure (selection criteria) to determine potential investors and only those investors are given the opportunity to stay in the apartment for a week at no cost. On the first day of the audit, the CEO of the Company approached you and informed you that they have already sold 5 apartments and they have also identified 15 potential investors who will be given a chance to stay in the apartment for a week at no cost to decide if they wish to purchase the apartments. The CEO has also asked you to promote the company's new project and the free stay scheme to your other audit clients. Required: Identify and explain if there is any threat to audit independence in the scenario? Your answer should refer to the Code of Ethics for Professional Accountants. (Max. Word limit -150 words) (5 marks)

Answer rating: 100% (QA)

There is a potential threat to audit independence in the scenario described as the auditor may be pe... View the full answer