It has been suggested that the most important matter affecting the credibility of the auditor is that of ‘Independence.”

I. The audit manager in charge of the audit assignment of Andrew PLC holds 1,000 £1 ordinary shares in the company (total shares in issue – 100,000). The audit partner holds no shares.

II. An audit partner of a firm of Certified Accountants is a friend of the chief accountant of James Ltd. The chief accountant is not a director of the company, and the audit partner is not responsible for the James Limited audit work.

III. The audit fee receivable from Janet PLC is £100,000. The total fee income of the Audit Firm is £700,000.

IV. The audit senior in charge of the audit of Margot Bank PLC has a personal loan from the bank of £2,000 on which she is currently paying 13% interest.

V. The audit partner is responsible for two audit assignments, Harry Limited and Jean Limited. Harry Limited has recently tendered for a contract with Jean Limited for the supply of material quantities of goods over several years. Jean Limited has asked the audit partner to advise on the matter.

Required:

a.Discuss, giving examples, matters other than independence, which might be relevant in relation to the credibility of the auditor and steps that the accounting profession has taken or might take in relation to them.

b- Comment on the above situations in the context of the independence of the auditor, showing clearly the principals involved: