Reference no: EM133028639

Question - You are the manager responsible for the annual review of your firm's audit engagements to identify situations where independence may be at risk and where appropriate safeguards should be applied. From your review of your firm's files relating to Shava Ltd you ascertain the following:

The company is expanding rapidly following a number of acquisitions and is preparing to apply for admission to the Zimbabwe Stock Exchange and to offer a proportion of its shares to the public. As a result of the special investigations undertaken, total fees from Shava Ltd amount to 17% of your firm's gross practice income for the current year.

The company is about to undertake a feasibility study, on a proposal to expand into Europe which is to be kept a secret from employees. To keep the initial costs of Shava Ltd team's European travel expenses a secret, a partner (who is not the engagement partner) has offered to have them put onto his credit card. There would then be billed as professional fees.

Required -

a) Explain the risks you would consider in deciding whether or not the appointment should continue.

b) Briefly describe the safeguards available.

c) Come to a conclusion on whether you consider the appointment should continue.