1. You are the audit manager of Frater & Scott, Chartered Accountants and you are planning the audit of CWJ Phones Services, which has been an audit client for four years and specializes in manufacturing luxury mobile phones. During the planning stage of the audit, you have obtained the following information.

1. The employees of CWJ Phones Services are entitled to purchase mobile phones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

2. You discovered that one of the recent marriages of one of the audit seniors at Frater and Scott is to an individual who has significant shareholding in CWJ Phone Services.

3. During the year the financial controller of CWJ Phones Services was ill and hence unable to work. The company had no spare staff able to fulfill the role and hence a qualified audit senior of Frater and Scott was seconded to the client for three months. The audit partner has recommended that the audit senior work on the audit as he has good knowledge of the client.

4. From a review of the correspondence files, you note that the partner and the finance director have known each other socially for many years and in fact went on holiday together last summer with their families.

5. As a result of the friendship between the partner and the director of CWJ, the partner has not yet spoken to the client about the fee for last years audit, 20% of which is still outstanding.

Required:

Each of the situations identified above by the audit manager involves a possible violation of the ICAJ code of ethics and a threat to the independence of Frater and Scott.

(i) For each situation, explain how the situation affects or does not affect the independence of Frater and Scott. ( 5x2)