You are Mark Ouse, an audit senior with the firm PLT & Co. You are planning the financial report audit of Nestree Ltd, a manufacturer of confectionery. The following issues have arisen:

1.Arthur Stick, the Finance Manager of Nestree, was ill for three months of the year and Eloise Lift, the engagement partner, received a request from Nestree to supply a member of staff on secondment until Arthur was well.

Eloise was only too happy to help and Daisy Flute, a member of PLT & Co's audit staff was seconded to Nestree for three months.

Nestree was happy with this arrangement and Eloise enjoyed the additional fees this created for the firm.

As a result of Daisy's secondment and the knowledge she now has about Nestree, Eloise is suggesting that she will be a valuable member of the audit team for the current financial year's audit.

2.You are aware that Nestree's Finance Director, Barbara Polo, plays on the same softball team as Eloise Lift and recently spent a week with the team on a tour of Vanuatu.

REQUIRED:

a)For each scenario, identify and evaluate any threats in relation to auditor independence. Justify your response by explaining what the issue is for the particular threat identified.

(8 marks)

[Answer here]

b)Identify any safeguards or actions to be taken to reduce the independence threat identified for each scenario in (a)above.(4 marks)

[Answer here]