Q5 Your audit rm, CDE 31 Co. has just taken on a new client, HSpa Ltd [HSpa}, a very successful indigenous health club that operates both a membership and pay as you use system. HSpa, which commenced business in 2lll, has faced competition for re last two years from a nationwide health club, Gyms Ltd, which operates a membersonly policy. You have just been advised that your rm has received an invitation to tender for the audit of the company that owns Gyms Ltd. The Managing Director of HSpa, Maeve, is an old college friend of your audit manager and it was through this connection that your rm was able to tender for its audit. You have been assigned as senior auditor for HSpa. [in a recent visit to your ofce, Maeve stated that she would like to extend an offer that all staff of CDE & Co. would be eligible for a special membership rate, which is Elli-E: of standard membership rates and then entitles the member to TS'i-E off special classes. She proposed that you sit on the board of directors at HSpa as a nonexecutive director. Additionally, she proposed that your rm conrm, as part of the audit, the gures on an insurance claim to be submitted in respect of damage caused by a burst water pipe. The pipe burst during a spell of cold wea'rer in the main gym area just prior to the year end. Required: (a) In re content of the above scenario, {i} Evaluate the erical threats {real or perceived] which may affect the independence of your rm's audit of H-Spa,' and (3 marks) {ii} For each threat recommend how it might be eliminated or mitigated to a satisfactory level. [3 marks) (b) Discuss the benets of an audit committee to a company. [-1 marks)