ACCT3000 AUDITING_Case Study (part 1)_Semester 2, 2020Write answers to each of the five (5) situations described below addressing the required criteria (i.e. 1 & 2) in each independent case. You may use a tabulated format if helpful having “Threats”, “Safeguards” and “Objective Assessment” as column headings.Liam Neesonhas been appointed as a junior auditor ofBrilliant Accounting Limited (BAL). One of his first tasks is to review the firm’s audit clients to ensure that independence requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His review has revealed the following:(a)BAL has recently been approached by Western Development Limited (WDL) to conduct its audit to which BAL has agreed. Ric Flair, one of the partners at BAL, is being considered to lead the audit of WDL. Ric’swife Wendy Barlow has recently purchased significant amount of shares in Freo Minerals Limited (FML). WDL is also known to have a substantial investment in FML and influence FML’s key decisions.(b)BALhas recently been approached by Bluecorp Group Limited(BGL)to conduct its audit to which BAL has agreed. The accountant at BGL, Paul Levesque is the son in lawof Vincent McMahonCA, who is an audit partner at BAL. Vincentput in a request to lead the BGL audit. Vincentbelieves that he can get the BGL audit completed efficiently and effectively since he gets along really well with Paul. However, beingaware of Vincent’s relationship with Paul, BAL will not be assigning Vincentto the audit team of BGL.(c)Bluecrest Mining Limited (BML) has been a long standing audit client of BAL. BML waslisted on the Australian Securities Exchange (ASX)twenty years ago. Since the previous two years BML has accounted towards 30% of total fees received by BAL. Prior to this the total fees from BML only comprised of around 11% of BAL’s total fee revenue from all clients. The increase in fee from BML in the recent period is attributable to its expansion and diversification. BML has not paid BAL any of its fees for the previous period. BML audit for the current year is now due.(d)Rey Steel Limited (RSL) has been a long standing audit client of BALand is one of the oldest companies listed on the ASX. RSL audit has just been completed for the current year. The engagement partner on the audit, Shawn Michaels CPA, has been the key audit partner on the RSL audit engagement for previous four years. David Lont FCPA is one of the three managing partners at BAL. Directors at RSL have always admired David’s skill and expertise. David is planning to retire from BAL. On hearing this, the directors at RSL approach David with a very lucrative compensation package to join the RSL team as a financial controller.(e)BALhas performed the audit of Vegas Metals Pty Limited (VM), a large proprietary company (NOTpublic interest entity) for the last two years. BALhas also beenpreparing VM’s tax calculations andproviding services related to the preparation of accounting records and financial statements to VM.
Required:For each of the independent situations above, and using the conceptual frameworkin APES 110 (Code of Ethics for Professional Accountants), answer the following questions:
1.Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified.(5 marks)
2.Provide an objective assessment of whether audit independence can be achieved (5 marks)
