Identify and explain FIVE ethical threats which may affect the independence of Pink Partners & Co’s audit of Golden Finance Co

Identify and explain FIVE ethical threats which may affect the independence of Pink Partners & Co’s audit of Golden Finance Co

Section B – ALL SIX questions are compulsory and MUST be attempted
Please write your answers to all parts of these questions on the lined pages of the Candidate Answer Booklet.
1 You are an audit manager of Pink Partners & Co (Pink) and are planning the audit of Golden Finance Co (Golden), a
banking institution which provides a range of financial services including loans. Your firm has audited Golden for four
years and the company’s year end is 30 September 2015.
At the end of August, Golden’s financial controller left and the new replacement is not due to start until approximately
two months after the year end. The finance director, who is the sister-in-law of the audit engagement partner, has
asked if a member of the audit team can be seconded to Golden for three months to act as the temporary financial
controller.
You are aware that a number of the audit team members currently bank with Golden and two team members have
significant loans owing to the company.
Pink’s taxation department also provides services to Golden. They have been approached by Golden to represent them
in negotiations to resolve some outstanding issues with the taxation authorities, for which the fees quoted are
substantial.
The finance director has informed the audit engagement partner that when the audit is complete, she would like the
whole team to attend an evening watching the national football team play a match followed by a luxury meal.
Required:
Using the information above:
(i) Identify and explain FIVE ethical threats which may affect the independence of Pink Partners & Co’s audit
of Golden Finance Co; and
(ii) For each threat, explain how it might be reduced to an acceptable level.
Note: The total marks will be split equally between each part.