Submitted By: Muhammad Hassan

Reg. No.: L1F21ASOC0034

Submitted to: Ma’am Amna Shafiq

Course: Auditing principles & practicing

Date: DEC 4th 2022

Situations:

1. Fancy Ceramics:

In the first situation Mr. Smith and his wife has been invited by
managing director of fancy ceramics [Client] on a long weekend in
France which can be considered as gift if they pay for it. The rules say
gift and hospitality cannot be accepted.

Second Mr. Smith has been Partner for 20 years on this engagement
which may create a familiarity threat as they know each other for a
long time.

To minimize this threat firm should not allow Mr. Smith to attend the
event and consider some other partner on this engagement.

2. Gorgeous Potteries:

In this situation where audit firm is approached by gorgeous potteries

to accept appointment as auditors. One of the firm Partner is secretary
of the company and his parents are shareholders and directors which
create a self-interest, familiarity or intimidation threat.

According to rule the member can influence financial statements

through his relationship so audit firm should make sure the member
should not be included in the audit team in any case or do not accept
the appointment.
3. Green Goods:

In this situation where Green Goods director is unhappy with the fee
charged and refusing to pay outstanding bill the firm faces self-
interest threat