Audit and internal review

QUESTION 3 You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specialize in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years. The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year. During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit. Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues. The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate. Required: i. Explain FIVE ethical threats which may affect the independence of Currant & Co's audit of Orange Financials Co. (5 marks) ii. For each threat explain how it might be reduced to an acceptable level. (5 marks) Describe FIVE types of procedures for obtaining audit evidence