Your firm has been invited to accept appointment as external auditor to AB ltd you have not had any previous dealings with AB Ltd but you act as auditors to CD Ltd , one of its major competitors
In addition to your appointment as an external auditor to AB ltd you have also requested that your firm:
1. Assist with the preparation of both the company’s corporation tax return and the directors’ personal tax returns
2. Provides tax planning services to both the company and its directors
3. Provides the company with general business advice
AB ltd is currently in the process of expanding its manufacturing capacity and has requested additional borrowing from its bank to finance the expansion. In support of this request, AB ltd has provided the bank with business plan including a profit and cash flow forecasts. The bank has in turn requested that the company’s incoming audit firm carry out a review of these e forecasts and produce an accompanying report.
Your firm has a total of 20 Partners and 400 employees
Required:
(a) Identify and explain the threats to your firm’s independence which may arise from the provision of the audit and non –audit services requested by AB ltd and describe the safeguards you would put in place to mitigate those threats. (8marks)
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