Reference no: EM132810984

Question - Marie encounters the following when planning the audit of Cars 'R Us Ltd. (CRU), a large auto dealership. Marie is a senior auditor working at Kingsley & Wallace, CPA's. Kingsley & Wallace have been auditing CRU for many years.

During the year, the assistant finance director of CRU left and joined Kingsley & Wallace as a partner. It has been suggested that, due to his familiarity with CRU, he should be appointed as the partner on the audit engagement.

The directors of CRU are planning to list it on a stock exchange within the next few months and have asked if the engagement partner at Kingsley & Wallace can attend the meetings with potential investors.

Once CRU obtains its stock exchange listing, it will require several assignments to be undertaken, such as obtaining advice about corporate governance best practice. Kingsley & Wallace is very keen to have the additional work, however, CRU has implied that the directors will only consider the firm if the external audit is done quickly and with minimal questions/issues.

Required - Explain the threats that may affect the independence of Kingsley & Wallace's audit of CRU. For each threat, explain how it might be reduced to an acceptable level.