You had been recently promoted to Senior Auditor of the audit firm Jose Rizal and Associates and was asked to

consider the following independent situations:

A. Leanna David is part of the audit team for the current audit of Jupiter Pty Ltd (Jupiter). After 2 weeks at the

client, he has advised you that he has been offered a job at Jupiter as soon as the current audit is finished.

B. One of your major clients, Just Squeeze Juice Pty Ltd, has talked to you about a consulting engagement

next year for you to do complete review of the adequacy of the entity's quality controls over the production

of its fruit juices. However, the managing director has indicated that some of the Board are concerned about

you taking up too much of their staff's time asking unnecessary questions. Therefore, he has suggested that

your chances of getting the engagement will be significantly improved if you keep your questions of staff to

a minimum during the current audit.

C. You have audited Avatar Pty Ltd, a stable engineering firm, for several years. At the start of this year, the

finance director, Michelle Cruz, retired after 10 years with company and was replaced by Sherlon Dizon, a

long-time friend of the audit manager Karlo Arcilla, who was best man at Sherlon's recent marriage.

D. One of your audit clients, Amethyst Pty Ltd (APL) is a large superannuation fund. The Australian Taxation

Office has advised APL that it has rejected its taxation treatment of a material amount of income from

investments and that it disagrees with the taxation advice APL gave to its members. The matter has been

referred to the Superannuation Complaints Tribunal and APL has requested that you represent them at the

Superannuation Complaints Tribunal.

Required:

For each of the independent situations above:

(a) Identify the type of potential threat to independence. Justify your answer. (8 marks)

(b) Explain what safeguards, if any, that could be implemented to reduce the independence threats. (4

marks)

(c) Assess whether audit independence can be achieved. (4 marks)

You may like to present your answer in the form of a table as below.

Situation a) Threat Justification b) Safeguard c) Assessment of audit

independence

A

B, etc.

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