SAB Sdn Bhd had a disagreement with the existing auditors, Aida & Co., on the previous

audit. Currently, SAB approaches you and indicates that they wish to appoint your firm, Wani

& Associates as their new auditors. The Managing Director of SAB has asked you for advice

on the procedures for change in auditors' appointment.

Discuss the procedures that should be taken, for the change in professional

appointment according to the MIA's By-Laws (On Professional Ethics, Conduct and

Practice). (8m)

a- by your firm (Wani & Associates) and

b- by Aida & Co

Azam, a partner in Azam & Co, has been the audit engagement partner for Jasa Baik Bhd

(JBB) for the past seven years. Azam's son has just accepted a job offer as a sales manager in

JBB and his position entitled him to shares in JBB as part of his remuneration package. Azam

& Co has recently been appointed as JBB's internal auditor. JBB has suggested that the

external audit fee should be renegotiated with at least 25% of the fee being based on the profit

after tax of JBB as they feel that this will align the interests of Azam & Co and JBB.

Explain the ethical threats which may affect the independence of Azam & Co with respect to

the audit of JBB. (8m)