Case 4-4 Threats to Audit Independence (pg. 296-297)
Case 4-4 Threats to Audit Independence (pg. 296-297) To do First 2 Questions From Page 297
Identify any potential threats to independence that exist based on the facts of the case?
Thinking back to the biases discussed in Chapter 2, what biases might the identified threat(s) make Katy more susceptible to and why?
Is Katy obligated to discuss her feelings about DGS with the compliance partner when they meet? If so, what should she say? Do you think the compliance partner should remove Katy from the audit? Explain.
The SEC seems to be adopting the position that questions about the independence of auditors and the audit engagement can be made based on a materiality criterion. The reason given is that auditors may be able to maintain their objectivity and integrity even when certain relationships exist. In other words, Katys relationship with the CFO might be evaluated through the lens of how significant the relationship is with respect to an independent audit. What are the dangers of relying on materiality to judge independence and can reliance on objectivity and integrity be sufficient to make these judgments in Katys situation?
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