Review each independent scenario below and then answer the questions included in the Required section:

1. McGrath and Partners Chartered Accounting firm is tendering for the audit of Harris Ltd for the next financial year. During the tender preparation, the manager of the audit team discovers that a separate division of the same city office of McGrath and Partners is also tendering to provide taxation services to Harris Ltd.

2. You are part of the audit team at DDD Partners, tendering for the audit of WaterFun for the 2020 financial year. During your review of an Australian Securities and Investments Commission (ASIC) company extract for WaterFun, you note that DDD holds an interest in WaterFun. The interest is material to DDD.

Required

1. For each scenario, identify and evaluate any threats in relation to auditor independence. Justify your response by explaining what the issue is for the particular threat identified.

(8 marks)