1) a) Identify and briefly explain the FIVE Fundamental Principles of Ethics? (5 marks)

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

1) b) Using the information above:

i. Identify and briefly explain FIVE ethical threats which may affect the independence of Beckham & Cos audit of Willian Co:

and ii. For each threat, explain how it might be reduced to an acceptable level. Note: The total marks will be split equally between each part. (10 marks)