【正确答案】Ethical threat Bethan Oak was the audit engagement partner of Willow Wands Co (Willow) for the last seven years and has recently rotated off the audit. It has been proposed that she should now become the independent review partner. This represents a familiarity threat as the partner will have been associated with Willow for a long period of time and so may not retain professional scepticism and objectivity. Willow has requested the previous engagement partner, Bethan Oak, attend audit committee meetings as a non-executive director of Willow has recently left. This represents a self-interest threat as the audit firm may be perceived as performing the role of management by attending these meetings and this threatens objectivity. A non-executive director of Willow has recently left and the management of Willow have asked whether the partners of Beech & Co can assist them in recruiting to fill this vacancy. This represents a self-interest threat as the audit firm cannot undertake the recruitment of senior management of Willow,especially as non-executive directors have a key responsibility in appointing the audit firm. The total fees received from Willow for last year equated to 16% of the firm’s total income. The fees for this year have not been finalised, but it is anticipated that they could be greater than 16%. There is a potential self-interest threat as the total fees could represent a significant proportion of Beech & Co’s income. Last year’s audit fee was being paid monthly, however, the last three months’ payments are outstanding. A self-interest threat can arise if the fees remain outstanding, as Beech & Co may feel pressure to agree to certain accounting adjustments in order to have the previous year and this year’s audit fee paid. In addition, outstanding fees could be perceived as a loan to a client which is strictly prohibited. The audit manager of Willow is leaving Beech & Co to become the financial controller at Willow. This represents a self-interest and familiarity threat as the audit manager is familiar with the audit plan which is to be adopted at Willow and he may also have commenced work on this year’s audit.

【正确答案】Managing these risks As Willow is a listed company, then Bethan Oak should not serve as the independent review partner for a period of two years. An alternative review partner should be appointed instead. The firm should politely decline this request from Willow, as it represents too great a threat to independence. Beech & Co is able to assist Willow in that they can undertake roles such as reviewing a shortlist of candidates. However, they must ensure that they are not seen to undertake management decisions and so must not make the final decision on who is appointed. Beech & Co should assess whether audit and non-audit fees would represent more than 15% of gross practice income for two consecutive years. If the recurring fees are likely to exceed 15% of annual practice income this year, additional consideration should be given as to whether the taxation and non-audit assignments should be undertaken by the firm. In addition, if the fees do exceed 15% then this should be disclosed to those charged with governance at Willow. Beech & Co should discuss with those charged with governance the reasons why the last three months’ payments have not been made. They should agree a revised payment schedule which will result in the fees being settled before much more work is performed for the current year audit. A new audit manager should be appointed to Willow and any work already undertaken by the previous manager should be independently reviewed. In addition, it would be advisable to modify the audit plan so that the manager would not be overly familiar with the approach to be adop