QUESTION 2 ( 9 Marks) Threats to independence.

| October 14, 2019

The following are separate situations.

(a) Katrina Ng ,the Senior Accounts Manager ,from Jenkins Ltd has fallen ill and will need replacing
      for the next four months.Your accounting firm,Thornleigh Accountants has been asked to supply
      a staff member on secondment until Katrina Ng returns. Your firm has supplied Ellen Davis and
      she finished up after four months in mid May .Your firm is going to do the audit of Jenkins Ltd
       from mid July and intend to use Ellen Davis as part of the audit team.

(b)John Dargin ,the Audit Manager of the Dargin Associates Accountants ,has just received the
      accounts from Winmalee Ltd .This has taken an optimistic approach to the valuation of
      development expenditure capitalised in intangible assets .The senior staff bonuses are all related
      to the firm’s profit performance and     Winmalee have provided copies of details taken from
      various accounting standards which are sympathetic to their approach to valuation of these
      assets .

( c) The Chocolate company has asked your firm to carry out the audit of its financial statements .
       It also has invited your firm to visit its seconds chocolate shop where defective chocolates are
       sold at a considerable discount  prior to completing the audit .

(d ) The Expert Travel company has been getting you to do its audits for the past two years and is
        currently considering its choice of auditor for the next year. Mike Steketee ,the Managing
         Director ,has asked to meet you and in the meeting he has advised that his firm is going to be
         expanding and that he expects that the auditor will need to be flexible in their approach during
         the next audit and he needs to provide your answer about this before the next audit.

( e) You are about to carry out the audit of Elmtree Ltd and become aware that a senior member of
       your audit team, Elaine Ong is engaged to James Bing who is the senior accountant at Elmtree.         

( f) Your audit firm MCM Accountants is about to start an audit of Rangers Ltd .One of your senior
       auditors on the audit ,Diane Polo ,plays on the same softball team as the Elise Lift the Senior
       Accountant, and several other staff members from Rangers Ltd.

QUESTION 3 (2  Marks)

You are asked to give details of the information required to be included in an Audit Report of the Financial statements of a public company.

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