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.

You have just been employed as a junior auditor at the chartered accountant firm of AFG. Upon

joining the firm; the partners requested that you re

view the firms audit clients to ensure that the

independence requirements of APES 110 are being met for the financial year ending June 2017.

Your review has revealed the following:

(a)

Other than the provision of audit services, AFG is also reputable for the quality of its

non-assurance services. The non-assurance service department of AFG is highly

regarded because they have several experienced and qualified members. AFGs strict

policy does not allow the members of the non-assurance department to participate in any

of their assurance services. AFG has provided Silver Fabricators Ltd (SFL), a listed

company, audit services for the last 3 years. This year AFG has decided to provide some

bookkeeping services to three major subsidiaries out of the four subsidiaries owned by

SFL.

(b)

Billie Jean, a senior auditor at AFG, has b

een on the audit team of Alliance Ltd for a

number of years. She was recently thinking of buying a land outside Perth to build a

summer house and she has already spoken to her bankers for loan. As the CFO of

Alliance has known Billie for a number of years now, he decided to help Billie by

seeking the approval of the board in order for Alliance to act as a guarantor for her loan.

(c)

Sandy Adnan, one of the senior partners of AFG responsible for the Sunbeam Ltds audit

team for the financial year ending June 2017

, recently came back from a 6 nights and 7

days cruise with her partner. It was an expensive trip but she received a 65% discount.

The CEO of Sunbeam Ltd arranged this concession for her as a gesture of his

appreciation for a job well done.

(d)

Aaron Parker is the current senior manager on the audit of Resources Techno Ltd.

Resources specializes in the production of electronic equipment and they have

showrooms only in Melbourne and NSW. Besides working for AFG, Aaron also owns a

car showroom in Perth (a family business). The business is not doing very well at the

moment. After having a brief conversation with CEO of Resources, he decided that he is

going to display and promote Resourcess equipment here in WA. Aaron has informed

you that this is not going to be a problem si

nce he is just going to promote Resourcess

product.

(e)

Larry Miller, the current senior manager on the audit team of Admiralty Ltd, the newest

client of AFG. Admiralty specialises in the production of mining equipment. Larry used

to work for Admiralty Ltd, as one of their senior accountants. He left Admiralty during

the end of 2013 and joined AFG on March 2016.

Required (

10 marks)

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.

(5 marks)

2.

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

(5 marks)