Case

You are an audit manager of a CPA firm, ACC & Co. Last week you had a meeting with one of the audit partners in the firm, Mr Wong with regards to an existing audit client, Oscar Limited ("Oscar"). Oscar is listed on the Hong Kong Stock Exchange and primarily engaged in the business of movie production and distribution. You noted the followings from the meeting: - Oscar would like us to ensure that the same audit team from last year's audit including the same engagement partner and manager is assigned to this year's audit. This is to ensure efficiency in the performance of the audit work. The engagement partner, Mr. Wong, has been overseeing this audit for the last 7 years. - Simon, the audit manager for last year's audit has informed us that he has recently invested in shares of the Oscar which provides him with favourable returns. - The son of Oscar's CFO, Edmond, will be part of the audit team this year. Edmond is a fresh accounting graduate of HKBU and believes he can put his knowledge into practice. - Oscar has been expanding rapidly in recent years and intends to pursuit an acquisition of a competitor. In an initial meeting with the director of Oscar, he states that the audit fee this year should be based on outcome of the success of the acquisition. They are willing to pay 25% more audit fees upon the successful acquisition. - Oscar has also asked us to help them to prepare a separate assurance report on their internal control system. Oscar wants us to consider using the same audit team members to perform this engagement, as they would have excellent knowledge of the company's internal control system. - Oscar has planned to offer entrance tickets to the whole audit team to the Annual Movie Awards where many artists and celebrities will attend the show. These tickets are in strong demands in the market. Required: Discuss the ethical and professional issues with respect to perceived independence in this audit engagement of Oscar and list the safeguards needed to be considered before deciding whether Oscar's requests can be satisfied.