3. You are an audit engagement partner of Al Jassasi & Partners, an audit firm based in Muscat. You are planning the audit of Zubair corporation, a Company based in Sohar, a car accessories manufacturing company. The finance manager of Zubair corporation Mr.Adil al harthy and the audit engagement partner Mr.Hammed al Jassasi are close friends because both of them studied together at the Sultan Qaboos University in Muscat. Also, the audit engagement partner has owned a significant number of shares in Zubair corporation. Apart from external audits, the Zubair corporation has requested Aljassai & Partners for providing other services like VAT return filing and tax calculations. The Zubair Corporation has also requested the audit partner to attend a meeting with the tax department on their behalf. The finance director of Zubair corporation has informed the audit engagement partner that when the audit is complete, he would like the whole team to provide a luxury dinner in a five-star hotel in Muscat.

Required:

Using the information above:

(i) Identify and explain any three ethical threats which may affect the independence of Al Jassasi & Partners. (1.5 Marks)

(ii) For each threat, explain how it might be reduced to an acceptable level. (1.5 Marks)