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) John Schmidt, CPA, CA, is unaware that his audit client, Franks Spa and Pool Co. makup 20% of John Schmidt firms revenues.
(b) JamPara goto his assurance client, Bob's Autosalto buy a used car for his daughter. Due to their business relationship, Bob offers Jama vehicle below cost.
(c) Jack Jacobs has been auditing Bob's Pool and Spa Limited for many years. Bob's Pool and Spa Limited has been experiencing financial difficultiand has not been able to pay its audit fefor the last three years. Bob's now owJack Jacobs $50,000 in assurance fees.
(d) Frank Fargo has three review engagements. One of the review engagements is done for Sangha Meatshop Ltd., which is 80% owned by his father-in-law, Sanchez Sangha. The remaining 20% of the Meatshop is owned by Sanchez's four children.

---

Definitions:

Primary Research

The process of collecting original data directly from sources through surveys, interviews, or experiments.

Trade Magazine

A publication targeted at professionals in a specific industry, providing news, trends, and other industry-specific information.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Closed-ended Question

A type of question that is formulated in a way that limits the respondent's answer to a set of choices.