Fundamental ethics principles You work in the consulting division of one of the large accounting firms. You have been seconded to the audit division for three months to work on XYZ client audit. For each of the following circumstances, state whether there is a potential threat to compliance with fundamental ethics principles using the ’reasonable and informed third party test’ as per APES 120.7.

a You own shares in XYZ which you inherited last year.

b You were part of the team that provided advice to XYZ two years ago on the improvements to their internal control system.

c One of your former school friends works in the marketing department of XYZ.

d The audit manager has emphasised that the audit cannot go over budget under any circumstances.