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Henry Wong is the audit partner of Wong, Judd & Co. James Swann, the MD of Evatt Ltd, a large public listed publishing company and Henry Wong are long time friends. Currently they are involved in a substantial joint business venture. James disclosed to Henry that Evatt Ltd is preparing tender documents for next year’s audit. He further indicated that the lowest tender bid received will secure the audit engagement. In addition to the usual audit services, Evatt Ltd is also requiring consulting services for designing and implementing a new financial information technology system that will generate information for the company’s financial statements.

Henry wants to tender for the audit of Evatt Ltd., so he met with his staff to discuss the potential threats to independence in relation to Evatt & Co as audit client. During the meeting, Alvin Turei, the audit senior commented that his aunty is the financial controller of the company. 


Referring to PES1 (Revised) andPES3 (Revised), and citing the standards where appropriate:

a) describe the ethical audit issues identified in the case facts above

b) describe the specific threats to independence that Henry and his firm are exposed to in relation to Evatt & Co, and

c) Suggest safeguards that may reduce the audit team’s exposure to independence identified in (a) and (b)

Ensure that your answers are clear and specific.

a) Ethical audit issue must contain integrity, auditing duties and responsibility

b) Ethical issue must contain objectivity, confidentiality, competence

c) Ethical issue must contain pes1 100.5 (a), (b), (c), (d)

d) Safeguard must contain pes2 100.13, 14,16

Word limit 600

• Pes1 and 2 is in:

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92832

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