Q1.

You are the audit senior of K&P Kalbani and Partners an audit firm based in Muscat and have been assigned to the audit of Sohar Group an SAOG, a listed company which has been an audit client for 8 years. They specialize in Car sales, service and manufacturing of car accessories.

Nasser al Kalbai was the engagement partner for Sohar Group and, as he had completed seven years as the audit engagement partner, has now been rotated off the assignment. The current audit partner, Mohammed al Alawi, has suggested that Nasser should take the role as independent review partner this year, to maintain the close working relationship. In addition, Sohar Group have requested that Nasser sit on the board as a non-executive director to enhance their finance skills within the organization.

The audit manager, not previously involved in the audit for Sohar Group Co, has just declared that he has shares in Sohar Group. The total fees received last year for Sohar Group Co are 17% of the firms total fee income. This years audit fee has not been confirmed, but along with tax and other services, it could be greater than previous years. A significant proportion of last years audit fee remains outstanding.

Required:

Using the information above:

(i) Identify FIVE ethical threats which may affect the independence of K&P Kalbani and Partners audit of Sohar Group: and

(ii) For each threat, explain how it could be reduced to an acceptable level.