You are the Engagement Quality Control Reviewer in the firm Rumyee & Jones (RJ) LLP and you are responsible for the independent review of all audits.It is March 1st, 2018, you are at the client premises with the audit team and are reviewing the audit working papers and draft audited financial statements of Black & White, a private company, for the year-end December 31, 2018, and the recommended auditor's report (an unqualified opinion) dated February 28, 2019.

PART A (6 marks, 15 minutes)

Highlights from Discussion with Audit Senior

The audit senior told you that the engagement partner, Ally Hogan, was very involved with the audit planning. However, there was little other involvement after that. At the end of the audit, Ally and the audit manager came to review the working papers on the same day close to the completion of the audit work. Ally asked the senior if there were any problems and when the audit senior informed her there were none, she signed off after a quick look through them.

The audit senior also informed you that when she was reading the board minutes, she found several references to Ally Hogan (the audit partner). It appears that Ally recommended that Black & White use the services of her brother, Riley Nagan, a management consultant, for advice on business development. Based upon Ally's recommendation, Black & White hired Riley for consulting services. The senior informed you that Ally asked her not to record it in the working papers or discuss it with anyone.

REQUIRED - PART A

Identify and explain three different violations of the rules of professional conduct or the general requirements of a financial statement audit.Explain using case facts and recommend the actions that should have been taken.