Your audit firm, CDE & Co$.$ has just taken on a new client, La$-$Nua Lid $($La$-$Nua$),$ a very successful indigenous health club that operates both a membership and pay as you use system. La$-$Nua, which commenced business in $2010,$ has faced competition for the last two years from a nationwide health club, Gyms Ltd$,$ which operates a members$-$only policy. You have just been advised that your firm has received an invitation to tender for the audit of the company that owns Gyms Ltd$.$

The Managing Director of La$-$Nua, Maeve, is an old college friend of your audit manager and it was through this connection that your firm was able to tender for its audit. You have been assigned as senior auditor for La$-$Nua. On a recent visit to your office, Maeve stated that she would like to extend an offer that all staff of CDE & Co$.$ would be eligible for a special membership rate, which is $50\%$ of standard membership rates and then entitles the member to $75\%$ off special classes.

She proposed that you sit on the board of directors at La$-$Nua as a non$-$executive director. Additionally, she proposed that your firm confirm, as part of the audit, the figures on an insurance claim to be submitted in respect of damage caused by a burst water pipe. The pipe burst during a spell of cold weather in the main gym area just prior to the year end.

REQUIREMENT:

a$)$ In the context of the above senario:

i$)$ Evaluate the ethical threats which may affect the independence of your firms audit of La$-$Nua; and

ii$)$ For each threat recommend how it might be eliminated or mitigated to a satisfactory level.

iii$)$ Discuss the benefits of an audit committee to a company.