You are an audit manager of Pico & Co (Pico) and are planning the audit of Golly Finance Co (Golly), a banking institution which provides a range of financial services including loans. Your firm has audited Golly for four years and the companys year-end is 30th September 2015.

At the end of August, Gollys financial controller left and the new replacement is not due to start until approximately two months after the year-end. The finance director, who is the sister-in- law of the audit engagement partner, has asked if a member of the audit team can be seconded to Golly for three months to act as the temporary financial controller.

You are aware that a number of the audit team members currently bank with Golly and two team members have significant loans owing to the company.

Picos taxation department also provides services to Golly. They have been approached by Golly to represent them in negotiations to resolve some outstanding issues with the taxation authorities for which the fees quoted, are substantial.

The finance director has informed the audit engagement partner that when the audit is complete, she would like the whole team to attend an evening watching the national football team play a match followed by a luxury meal.

Required: Using the information above:

(i) Identify and explain FIVE ethical threats which may affect the independence of Pico & Cos audit of Golly Finance Co;

(ii) For each threat, explain how it might be reduced to an acceptable level.