AUDITING

State and explain the threats for each scenarios as well as explain the safeguards for each scenarios.

(in a table form)

Write answers to each of the five (5) situations described below in a tabulated format if helpful having "Threats" and "Safeguards" column headings. The following situations involve Alvin Hii, an audit partner with the accounting firm of Kelvin & Sic Co. He is involved with the audit of Momoland Shipping Sdn Bhd (Momoland). 1. Alvin Hii's wife, Sarah Lau, is planning to take a loan from Momoland which is material to Alvin Hii, Sarah Lau, and Momoland. 2. The audit partner Alvin Hii's first cousin, Sophie Tang, recently purchased considerable shares of significant value in Momoland, which is material to Sophie, on the advice of her financial planner. 3. The assistant accountant of Momoland resigned 6 months ago and has not been replaced. As a result, Momoland's transactions have not been recorded and the accounting records are not up to date. To comply with the terms of the loan agreement, Momoland needs to prepare interim financial statements but cannot do so until the records are up to date. The managing director of Momoland wants Alvin to help them out because he performed the audit last year. Alvin agrees to help out Momoland for 1 month before the start of the annual audit on which he will be involved again. 4. Alvin Hii recently purchased a large number of shares in Cal El Sdn Bhd, a mining firm. The director of Momoland, Desmond Ling, is also known to have a large investment in Cal El Sdn Bhd. 5. To express sincerity towards the accounting firm Kelvin & Sic Co. and the audit partner Alvin, and to maintain a good working relationship in anticipation of another smooth audit, Momoland would like to present a complimentary 3-week holiday package voucher for Alvin and his family to Hawaii . All expenses, including accommodation, food, drink and travelling costs, will be paid by Momoland. Required 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. (Total 40 Marks)