4. Threat to independence EXAMPLE1 (2014 SI) HA - CGL You are an audit manager at Hall & Associates, who have been approached to conduct the audit of Computer Games Lid (CGL), a manufacturer of interactive computer games, for the year ended 30 June 2013. Hall & Associates has not previously audited CGL's financial report, although it has undertaken other types of engagements for CGL. Last year CGL hired Hall & Associates - - review to assist in the redesign of CGL's accounting software to ensure that internal controls over self-re internet sales were adequate to ensure the confidentiality of customer data and accuracy of recording sales. The new software was implemented at the beginning of the current year and appears to be working satisfactorily. As part of this year's audit, you expect to review the internal controls at CGL, including the controls within the IT systems. As part of CGL's financing arrangements with its bank, Easymoney Lid, it has a loan tim 17 covenant that stipulates that the quick asset ratio cannot be less than 1:1 or Easymoney Lid has the right to withdraw all funding. The board has advised you that CGL's quick asset ratio is currently at 0.9:1 due to industrial action holding up the sale of goods Quick a imported from overseas. The board has asked you to ignore this temporary breach of the miclation loan covenant, explaining that COL is a stable and financially sound company, and that = CA the ratio will return to a positive level on resolution of the industrial dispute. The board CL has indicated that unnecessarily disclosing this within the audit report would force it to reconsider its plans to use your audit firm for other engagements. As a result of CGL's current cash flow difficulties, the board has requested that Hall & Associate's audit fee for 2013 be paid in CGL shares. The board has indicated that the - market value of the shares will equate to the value of the audit fee charged by Hall & Associates. Required