You have been engaged by a firm of registered auditors, KPDE, to advise on a number of their audit clients whose case files have been selected for investigation by the audit regulatory authorities. Client O: is a large listed company that engaged specialists from KPDE to devise a valuation for intangible assets. The monetary figure that the KPDE team calculated was included in the financial statements that the KPDE audit team audited. Client P: was brought to the stock market in an initial public offering in the last 12 months. As a private company, Client P was seen to be a rising star much talked about in the offices of KPDE. A number of KPDE staff, both audit and other departments, subscribed for and received Client P shares when the company went public. KPDE audited Client P's financial statements before and after public listing. Client Q: dismissed its chief financial officer for misconduct just before its year-end. KPDE seconded a senior staff member and two juniors to help Client Q with its year-end financial statement preparation. KPDE are now planning the audit of those statements. Client R: Patrice Ho had been the partner in charge of Client R's audit She had become disappointed with KPDE's management style and looked for a career change. She recently resigned from KPDE and took up the position of Client R's Chief Finance Officer Client S: the KPDE audit partner has had serious disagreements with the management of Client S over their selection of accounting policies which she regards as optimistic. She has been told bluntly that if she does not agree with the management of Client S. they will find another audit firm to conduct the audit. Required: a) For each of the above client situations, explain what ethical issue(s) are at stake and what KPDE might have done to reduce the threat to their audit independence. b) (15 marks) What can audit firms do to try to ensure that audit staff understand the importance of audit independence? (10 marks)