Andrew Reynolds has been appointed as a junior auditor of King Chartered Accountants (KCA). One of his first tasks is to review the firms audit clients (all public interest entities) to ensure that independence requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His review has revealed the following:

(a) Rebecca, FCPA, is the engagement partner on the audit of DHP Limited (DHP). Tony Barlow, FCPA, is not involved in the DHP audit but practices in the same office as Rebecca. Tonys financially dependent daughter Niki is considering on using her savings to purchase a minor ownership interest (around 3%) in DHP.

(b) Timothy, FCPA is an engagement partner at KCA. KCA has recently been appointed the auditor of Maylands Ferries Limited (MFL). MFL has been providing ferry services in Perth for the past 17 years. Timothy has received a request to participate in the current years audit engagement of MFL. Timothys first cousin, Jack, is considering to purchase a 10% shareholding in MFL. Jack works as a financial controller is one the top 200 firms listed on the Australian Securities Exchange (ASX).

(c) KCA has recently been approached by GG Electronics (GG) to conduct its audit. The accountant at GG, Brendan Hall, is a child hood friend of Keven Nash CPA, who is one of the audit partners at KCA and is being considered to lead the GG audit engagement.

(d) KCA has recently been appointed the auditor of Premium Foods Limited (PFL). On completion of the audit, Paul Heiman, PFLs accountant, informed Jeff Hardy CPA, the lead engagement partner on the PFL audit that PFL had a gift for him. Jeff asked Paul what the gift was for, and Paul responded that PFL was impressed with the level of support they received from the audit team. PFL is offering Jeff and his family an all-expenses paid 2 weeks cruise package to the Bahamas.

(e) Big Steel Limited (BSL) is an audit client of KCA. BSL has requested that KCA help in designing as well as implementing a new IT system for BSL, setting BSLs policies and strategic direction, arranging interviews for BSLs hiring of new personnel, and providing advice on structuring BSLs corporate finance transactions.

For each of the independent situations above, and using the conceptual framework in APES 110 (Code of Ethics for Professional Accountants), answer the following questions:

1. Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified. (7.5 marks)

2. Provide an objective assessment of whether audit independence can be achieved (7.5 marks)