(B) Auditor Independence You are an audit senior at A& G, assigned to the audit of Lightning Ltd (Lightning) for the year ended 30 June 2015 and have become aware of the following situations. Situation 1 This is the final year that A & G will be engaged as auditors for Lightning under the current Audit contract. Sam ONeill, the Chief Executive Officer (CEO) of Lightning, has advised that in order for A & G to be reappointed as auditors, you will need to submit a tender for the audit, along with two other audit firms. Your firm has always enjoyed a good relationship with Sam and there have been no major disagreements between the engagement partner and the CEO or the Board. However, Sam has also asked the audit partner to ensure that he and the other audit team members on the job take it easy this year and not bother the staff of Lightning with too many questions. Situation 2 Lightning engaged A & G to advise on the appropriateness of capitalising internal development costs incurred in respect of the research and development of a new recyclable packaging for its product. The audit partner advised Lightning that the capitalisation of the development costs was appropriate and in accordance with the requirements of AASB 138, the accounting standard covering intangible assets. Situation 3 Your audit managers mother-in-law died two months ago, and left her vast estate in trust for the audit managers wife. The audit manager and his wife have just learnt that the estate, which is likely to be tied up in probate assessment for several months, includes a large shareholding in Lightning. The value of the shares is material in relation to the wifes total assets. Required (i) Identify and briefly describe the type of threat, if any, to A & Gs independence (6 marks) (ii) Describe two (2) appropriate safeguards or procedures that A & G could implement that would reduce the risk of a similar independence threat occurring in the future (4 marks)