Necessary safeguards which you think should be in place

Reference no: EM133655028

Case: You are an audit senior at K & K Chartered Accountants and assigned the forthcoming audit of ABC. Manufacturing Inc, a client your firm has been working with for quite some time. You haven't been part of this client before, but the rest of the audit team members of this year's audit were all involved in last year's audit. Kristy Amen one of your team members, has discussed with you that it should be a relatively easy audit because she's been on this client's team for the past seven years and there haven't been any issues with the financial statements. You're aware that Kristy Amen's husband is the finance manager at ABC. Manufacturing Inc. She shared with you that due to some personal financial hiccups, the company (ABC. Manufacturing Inc.) loaned her $10,000, with a relaxed payback plan until she gets her money situation sorted.

On another note, the directors of ABC. Manufacturing Inc. are eager to secure some new funds for the company's expansion plans. They've reached out to Hashim Nasir, the audit engagement partner, to have a sit-down with the company's bank manager and try to work out a hefty loan. Hashim Nasir is pretty excited about it - considering ABC. Manufacturing Inc's recent growth, and the audit fees this year are poised to make up around 30% of the firm's total revenues.

Required:

For the situation above, discuss and explain:

a) The ethical threats to auditors' independence and objectivity in general and specifically in context of the situation above.

b) The necessary safeguards which you think should be in place.

Reference no: EM133655028

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