The audit engagement partner for ABC Company Ltd. has been in place for approximately six years and his son has just accepted a job offer from ABC Company Ltd. as a sales manager; this role would entitle him to shares in ABC Company Ltd. as part of his remuneration package. Ackah and Associates have been appointed as internal as well as external auditors. ABC Company Ltd. has suggested that the external audit fee should be renegotiated with at least 20% of the fee being based on the profit after tax of the company as they feel that this will align the interests of ABC Company Ltd and Ackah and Associates.

Required:

i. Explain any FIVE ethical threats which may affect the independence of Ackah and Associates in respect of the audit of ABC Company Ltd, and for each threat explain how it may be reduced.

ii. Explain any FIVE factors that should be considered by an external auditor before reliance can be placed on the work performed by a companys internal audit department.

subject is auditing