you are the auditor partner for the AAA audit firm, tendering for the audit of Howard Ltd for the 2019 financial year. During your review of an Australian Securities and Investments Commission (ASIC) company extract for your client Howard Ltd, you note that AAA audit firm holds an interest in Howard Ltd. The interest is material to AAA audit firm.

Required: 1. What is the threat to compliance with the fundamental principles? (3 marks)

2. Explain whether any safeguards could be put in place to reduce the threat to an acceptable level. (2 marks)