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John Ban is an audit partner in a medium sized audit firm. He has been an engagement partner for more than 5 years in Quicker
John Ban is an audit partner in a medium sized audit firm. He has been an engagement partner for more than 5 years in Quicker Technology Ltd. (QTL), an ICT technology company listed in Hong the Kong Stock Exchange. His classmate at the Hong Kong University, Paul Pan has recent been appointed CFO of the company. They were good friends during school days but had seldom been in personal contact after graduation. However, they are members in the school alumni and Rotary members under the same regional board. John thought that it was an opportunity to increase client intimacy through personal bonds. He invited Paul for dinners and arranged social activities such as KTV or golfing. They soon resumed the friendship in the old days. One day, Paul mentioned in a casual talk that QTL was going to conduct a stock exchange transaction between QTL and Fast Tech Ltd. where John's wife has material investment in the stock. It would be good for both companies if QTL has sound financial results. He asked John's suggestions to improve QTL's coming annual accounts. Required 1. Is it a dilemma for an audit firm to cultivate client intimacy on one hand while maintain auditor's independence on the other hand? 2. Evaluate the potential threats under IFAC Code which may jeopardize John Ban's independence being an auditor of QTL. 3. What should John Ban do to reduce the threats? 4. What should John's audit firm do to increase auditor independence
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