You are Margaret String, one of the partners in the accounting firm Bader, String, Floss & Co. You have a large client, Drench Ltd, for which your firm has carried out a range of taxation, consultancy, audit and other assurance services. The firm now obtains significant fee income from Drench. Earlier in the year the firm provided consulting advice to Drench regarding the internal controls around its new purchase ledger system. Drench still owes the fees related to this service to the accounting firm. The planning work for the year end is about to commence and this will be the twelfth year that you have carried out the audit. The relationship between Drench and the audit team is excellent and the same audit staff have been happy to return to carry out the audit for the last five years, this consistency of staffing has been welcomed by Drench's accounting staff who feel this allows the audit to be done quickly and efficiently. Drench 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, Sally Bring. Sally accepted and will be starting her new role before the year-end audit visit. Before she leaves the firm, Sally has decided to take the audit team out for dinner, to say goodbye and thank it for its work over the last five years. Required:

1. identify the situations that may create ethical threats to independence.
2. Explain how the threat identified in 1) applies
3. Discuss safegurds to address the threat
4. Explain why professional independence is important for auditors

(You need to refer to relevant paragraphs in PES 1)

PES 1 LINK: https://documentcloud.adobe.com/link/review?uri=urn:aaid:scds:US:1ab78245-a5a8-4c10-88ee-4e596f1096a6

Need To Be Referenced