Independence You are a manager with Hodges Jones \& Sylvia (the Firm) and a member of the Firm's audit team for the audit of Hotel Corporation (the Company). The Company has been a long time tax client of the Firm and this audit of the Company's financial statements as of and for the year ended December 31, 2022, is the initial audit of the Company. Adam Sylvia served as the engagement partner for this audit. The Company requested the financial statements be audited in order to provide the statements to a prospective buyer. There are not any predecessor auditors or accountants and after much effort you and the engagement partner (Adam) and the quality review partner are satisfied with all of the audit documentation, including the documentation of audit procedures that have been performed in connection with the Company's opening balances. For an initial audit, the process has gone very smoothly, and it looks like the project will be a very profitable engagement for the Firm. As you are doing a final proofing of the financial statements that have been assembled by the Firm's administrative support team, the managing partner of the Firm walks up to your office, with a very disturbed look on his face, and asks you to follow him to the Firm's main conference room. As you are walking to the conference room, the managing partner tells you without much explanation that we need to talk about the audit of Hotel Corporation. When you get to the conference room, there are two people there that you don't know, and you also notice that the engagement partner for the audit of Hotel Corporation is not in the room. The managing partner of the Firm closes the conference room door and one of the two people that you do not know begins to speak. You are shocked at what this person, who is an attorney representing the Firm, has to say. Earlier that morning, Adam Sylvia confessed to the managing partner of the Firm that he is not independent of Hotel Corporation. He goes on to say that a number of years ago he had borrowed $500,000 from the husband and wife owners of Hotel Corporation and has not paid it back. He also shares that his wife has a gambling addiction and that he is devastated financially and at risk of losing his personal residence. He has never paid any of the principal or interest on the money borrowed from the Hotel Corporation owners. He further explains that Hotel Corporation owners have treated him (Adam) like the child they never had and that they intend to forgive the $500,000 and loan him an additional $300,000 in order for him not to lose his personal residence. They also offered to pay for his wife to go through an alcohol and gambling addiction treatment program which will cost another $50,000. They are completely unaware that these matters impair the Firm's independence and Adam has not told them anything different. The purpose of this problem is NOT to draw any conclusions about auditor independence. For the purposes of this problem, you are to assume that Hodges Jones \& Sylvia is NOT independent of Hotel Corporation. At the end of the presentation about this issue, the managing partner of the Firm asks you to look and see if there is a report of any type that the Firm could issue under the circumstances. By reference to the following, prepare a brief response for the Firm managing partner. Include the wording, if any, that would be required with respect to Independence if there is a report that could accompany the Company's financial statements as of and for the year ended December 31, 2022. - Auditing and Assurance Services, 9th Edition, Module A, Page 198, Other Public Accounting Services. - AR-C Section 80A Compilation Engagements paragraphs 22 and A38-A40