Question 1 Fraud, Professional Ethics and Auditor Independence - 20 marks (a) The auditor will consider ethical requirements before accepting a client. (i) Explain why this step is important. (5 marks) (ii) Can an audit firm provide audit and non-audit services to the same client? Explain your answer. (5 marks) (b) Prior to the appointment of Burberry Partners as the auditor of WeCare for the 2021 financial year, it is found that Burberry was previously engaged by WeCare to value its intellectual property. The consolidated balance sheet as at 30 June 2021 included intangible assets of $45 million, which were valued by Burberry on 1 March 2021. The intangibles are considered material to WeCare. Further, immediately after the audit, WeCare requests Burberry to present their financial performance to potential shareholders for new shares being issued in 2022. (i) Identify and explain two possible threats to audit independence and its potential breach of ethical principles. (5 marks) (ii) For each threat, explain any safeguards that could be put in place to reduce the threat to an acceptable level. (5 marks)