Q4. Mention what kind of threat to independence or audit issue occurs in each of the following case and why (EXPLANATION REQUIRED) (1 X 4 marks)

1. Mary & Co. is a very reputed firm of auditors in Erbil. In the year 2020, their total income in fees from clients is $300,000. In the total fee, $70,000 is contributed by one of their clients Shah & Company.

2. Shawn and Ali are childhood friends. Ali has a construction company for which he had an assurance auditor until 2019. In 2020, the auditor gave his unwillingness to do the audit. So Ali requested Shawn, who is a professional accountant to do the audit for 2020, as audit of construction companies is mandatory (compulsory) in the country as declared by regulatory authority.

3. Ms Shydra is a professional accountant and during 2020 she audited the books of M/s Cairns company which deals with specialty chemicals. During the audit she examined expenses on a new chemical being made by M/s Cairns which they will launch in 2021. It will give a significant edge to the company over competition.

Ms Shydra invited one of her friends over for dinner who is working in another chemical company which is competitor of M/s Cairns and in a casual conversation mentioned the new chemical being made by M/s Cairns to her. Was this correct? Explain.

4. Shane audited the books of XYZ Company for the year 2019. He finished the audit in March 2020 and gave them a clean report. In mid-2020, he joined them as an employee in the finance department.