Reference no: EM132949117

Question

Simon commenced work as a senior member of the audit team at Rural Assurance Partners (RAP) on 1 July 2020. RAP is an accountancy firm in Mildura, which provides accountancy, business advisory and audit services to local firms. Prior to 1 July 2020, Simon was employed as the chief accountant at Sunshine Ltd, a medium sized manufacturing firm in the same regional town as RAP. One of Simon's first tasks at RAP is to assist with the audit of Sunshine Ltd. Simon is not the senior audit partner whose task it is to provide an audit opinion. However, Simon is heavily involved in the planning of the audit and is required to conduct many audit tests.

Simon arrives at Sunshine Ltd for five days to conduct audit testing and is given his old office to work in. He discovers that he forgot to take several expensive paintings from the office when he ceased working for Sunshine Ltd. Before commencing any testing for the audit, he is seen by many Sunshine Ltd employees and several members of the public, placing these paintings into his car. The CEO of Sunshine Ltd helped Simon carry the paintings out of the building.

Simon commences the testing at Sunshine Ltd and discovers some large errors with the balances of three accounts. The accounts in question are all cash or cash equivalent accounts. Before Simon has a chance to raise the issue, John, the new chief accountant, tells Simon that he is very good friend with the pop band BTS and that he can arrange for Simon's daughter (who is a huge BTS fan) to meet the band in Seoul following the audit. Simon agrees and John books and pays for flights for Simon and his daughter to travel to Seoul.
Simon has not disclosed any of this information to other audit team members or to management at RAP.

Identify and explain four (4) potential threats to Simon's independence as Sunshine Ltd.'s auditor.