Identify potential threat to independence safeguards

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Question - Christopher Brown has been appointed as a junior auditor of Apex Chartered Accountants (ACA). One of his first tasks is to review the firm's audit clients (all public interest entities) to ensure that independence requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His review has revealed the following:

Johnny, FCPA, is the engagement partner on the audit of Yummy Food Services Limited (YFSL). Johnny's sister Rebecca owns a large number of shares in a mutual fund investment company, XYZ, which in turn owns shares in YFSL. Rebecca's investment in XYZ is material to both her and her partner Jack. Reading the investment company's most recent financial report, Johnny is surprised to learn that the XYZ's ownership in YFSL has increased dramatically.

1. Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified.

2. Provide an objective assessment of whether audit independence can be achieved.

Reference no: EM132513976

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