The Australian Parliamentary inquiry into auditing was conducted in 2019 and alleges that audit firms are not doing enough to provide high quality audit services and to maintain independence from their clients.

The inquiry identified key issues including audit firms receiving large fees from providing both audit and non-audit services to the same client. The associated fees raise the risk of audit firms becoming financially dependent on these clients and susceptible to pressure from the client to make questionable judgments in relation to the evaluation of accounting decisions and treatments. A related issue are audit firm and client relationships continuing for extended periods of time, often decades.

Required:

A) Explain why it is important for accounting firms to be independent of their clients. Discuss this based on their responsibility to the community and the need to evaluate accounting practices of clients based on an ethical basis rather than a legal basis

B) For the areas of concern noted in the information provided above, explain why these situations may result in the accounting firm not fulfilling their duty under the APESB ethical standards and the implications this may have on the Accounting Profession. Only mention relevant principles and threats for each area of concern