For Each of the Following, Indicate If There Is a Threat

question 44

Essay

For each of the following, indicate if there is a threat to independence. If so, state the threat and a possible safeguard.
a) J.P. Schultz, CPA is unaware that his audit client, Cold Creek Spa Co. makes up 20% of J.P. Schultz firms revenues.
b) Luca Lobo goes to his assurance client, Joe's Auto Mart to buy a used car for his daughter. Due to their business relationship, Joe offers James a vehicle below cost.
c) Leslie Jacko has been auditing Joe's Pool and Spa Limited for many years. Joe's Pool and Spa Limited has been experiencing financial difficulties and has not been able to pay its audit fees for the last three years. Joe's now owes Leslie Jacko $50,000 in assurance fees.
d) Peter Razo has three review engagements. One of the review engagements is done for Hugo's Meatshop Ltd., which is 80% owned by Peter's father-in-law, Igor Slovlog. The remaining 20% of the Meatshop is owned by Igor's four children.

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Definitions:

Common Understanding

A mutual agreement or shared knowledge among a group of individuals, often essential for effective communication and collaboration.

Project Purpose

The main goal or objective that a project aims to achieve, clearly defining the project's rationale and expected outcomes.

Anchoring Statement

A statement or reference point that is used in negotiation or decision-making processes to set the tone or basis from which to begin discussions.

Purpose Statements

Concise statements that outline the reasons or objectives for the existence of a project, document, or organization.