Write answers to each of the five $(5)$ situations described below addressing the required criteria

$($i$.$e$.1$ & $2)$ in each independent case. You may use a tabulated format if helpful having

$$Threats$,$Safeguards$$ and $$Objective Assessment$$ as column headings.

Walter White CPA has been appointed as a junior auditor of Giovanni & Creed Accounting

Solutions $($GCAS$).$ One of his first tasks is to review the firm$$s audit clients to ensure that

independence requirements of APES $110($Code of Ethics for Professional Accountants$)$ are

being met. His review has revealed the following:

$($a$)$ Awesome Holidays Limited $($AHL$)$ has been a major client of GCAS since the past four

years. AHL contributes around $16$ per cent of the audit fee revenue and $23$ per cent of

the non$-$audit fee revenue of GCAS. AHL has not paid any of its fees for the past two

years, citing cash flow problems. The partners at GCAS are reluctant to put any pressure

on AHL for outstanding fees, as AHL is a high$-$profile client that they wish to retain.

$($b$)$ Marine Limited $($Marine$)$ is a large marine engineering business that repairs fishing

trawlers. GCAS is the auditor of Marine. GCAS$$s IT consulting division has undertaken

several inventory management system implementation projects and is actively looking

for opportunities to perform more of this type of work. As a result, GCAS$$s IT

consulting division is planning to submit a proposal to implement an inventory

management system at Marine.

$($c$)$ GCAS is considering taking on Megha Fashion Limited $($MFL$)$ as a new audit client.

MFL is a large manufacturer of women$$s clothing. Pheobe Stallone CPA, one of the

partners in GCAS, has a substantial investment in MFL$.$ Phoebe informed Walter that

prior to GCAS$$s bidding on the engagement she will place her MFL shares in a blind

trust, where she would not know what action the trust will take regarding any shares or

other investments. Phoebe says if GCAS wins the engagement, then this action of hers

will allow GCAS to undertake the MFL audit without any independence issues.

$($d$)$ Bradley Cooper, an audit senior with GCAS is very excited to be a part of the audit

team of Big Metals Limited $($BML$).$ Bradley feels that he will be an asset to the audit

team, as his sister Sheryl Cooper is BML$$s financial controller who is responsible for

the preparation of BML$$s financial reports.

$($e$)$ GCAS is considering taking on Diamond Limited as new audit client. Robert Stanley

CPA, an audit partner at GCAS has informed Walter that his wife has a significant

investment in Diamond Limited. Robert says this should not be an issue as he will make

sure he is not involved in Diamond Limited$$s audit. Craig Stanley CPA, another partner

at GCAS who works in the same office as Robert is being considered to lead the

Diamond Limited audit if GCAS issuccessful in obtaining Diamond Limited as its audit

client.

Required:

For each of the independent situations above, and using the conceptual framework in APES

$110($Code of Ethics for Professional Accountants$),$ answer the following questions:

$1.$ Identify potential threat$($s$)$ to independence & recommend safeguards $($if any$)$ to

reduce the independence threat$($s$)$ identified. $(10$ marks$)$

$2.$ Provide an objective assessment of whether audit independence can be achieved.

$(10$ marks$)$