Reference no: EM133206272

Identify and explain six ethical threats to independence and fundamental ethical principles.

For each of the threats identified in question (a), propose a safeguard to alleviate the threats to acceptable level.

You were about to sign off on Kirsty's findings but was worried that there were some errors that you may not be aware of. You obtained an audit trail of the clearing account for the PAYE tax for March. You immediately noticed that the reason that the payment to the IRD was late because the Clearing Account did not have a sufficient balance to pay the full amount on time. As you were curious about two transactions in the company's general ledger called Miscellaneous Suspense account totalled $ 45,320.25, you arranged to obtain two copies of paid cheques from the bank. The cheque was made out to MercyAscot Hospital. You presented the information to Dwayne who immediately confided that he needed the money to pay his son's medical bills. Dwayne had used the PAYE Tax Clearing account and the Miscellaneous Suspense account in an effort to mask the transaction. He requested that you would not disclose the issue to Ken because the company suffered no loss or financial penalty, and the amount was below the audit materiality level, therein you did not have to worry about it. Dwayne promised to repay the company in the next three months.

Toyplanet was keen to see the auditor's report to be signed off within three working days, one week earlier than had originally been envisaged. While you were reviewing the working papers, Ken called you saying that two of his friends are looking for a 'realistic' auditor and he wanted to introduce you to them. This was great news to you and your firm. You have decided to sign off the auditor's report without raising any concerns.