Described below are situations that have arisen in four unrelated external audit clients of  your firm Sparkle LLP (Sparkle).

Sapphire plc (Sapphire)

Sapphire is a listed company. They appointed a new Finance Director on 5 May 20X2 asthe previous Finance Director left the company to join a competitor in February 20X2.  Jewel’s year-end is 31 May 20X2. In light of this new appointment, the directors of Sapphire have requested that the prior year's engagement partner, Mohammad Asif, continues as a key audit partner for the current year’s audit to safeguard audit quality. Mohammad has been the key audit partner for the previous seven years.

Topaz Ltd (Topaz)

The financial controller at Topaz has been on long-term sick leave and the finance directorhas asked Sparkle for help with finalizing the accounting information in preparation for theyear-end audit. Topaz has a wide range of assets, and he has requested that a member ofstaff at Sparkle be seconded to Topaz to help with calculating the deprecation charge forthese assets.

Ultralite Ltd (Ultralite)

Ultralite has been a client of Sparkle for a number of years, however, their audit fee fromthe previous year is still to be paid. The full fee is outstanding. Ultralite has beenexperiencing some cashflow problems following difficult trading conditions and theirdirectors are unable to confirm that they will be able to pay the fee before this year’s auditreport is issued.

Viridine Plc (Viridine)

Viridine has recently decided to outsource its internal audit function and has requested thatSparkle accepts the engagement for an annual fee of £550,000. The directors believe thatSparkle will be able to provide a cost-effective service due to its cumulative knowledge ofViridine's business gained through its provision of the external audit. In addition to the auditof their financial statements (annual fee of £600,000) Sparkle also provides Viridine with ITservices costing £2.4 million per year. Sparkle’s total annual fee income, excluding theproposed internal audit services for Viridine, is £20 million.

For each of the situations outlined above, explain the threats to the objectivity andindependence of the external auditors and list the safeguards available to mitigatethese threats.