You are a junior auditor working for Vivian Chartered Accounting (VCA), a mid-tier public accounting firm with clients located in South Australia. For the past five consecutive years, VCA has been the auditor of CottonTail Pty Ltd (CottonTail), one of Australia's leading retailers of computer software. CottonTail has had its shares listed on the Australian Securities Exchange (ASX) since 2015.

In the past five years, VCA has undertaken other types of engagements for FIL. Last year CottonTail hired VCA to assist in the redesign of CottonTail's accounting software. The work provided includes the redesign of internal controls over internet sales to ensure the accurate and timely recording of internet sales. The new software was implemented in August 2020 and appears to be working satisfactorily. As part of this year's audit, you expect to review the internal controls at CottonTail, including the controls within the IT systems.

CottonTail is very happy with the quality of the audit staff, in fact it recently offered the role of Financial Controller to the audit team senior, William. William has accepted and will be starting his new role at CottonTail in the next month. Before he leaves the firm, William decides to take the audit team out for dinner, to say goodbye and thank it for its work over the last five years. CottonTail is also offering you to purchase the software at a discount of 50% of the market price, based on the work and contribution that you and the audit team have done for them in the past.

Required:

(a) Identify and explain any potential threats to auditor independence, based on the requirements set out in the Code of Ethics for Professional Accountants APES 110 and Corporations Act 2001.

(b) Suggest any safeguards to the threats identified above.