Question

Zaspa Inc. is a public company that manufactures and sells tennis racquets. The company has expanded internationally and its auditors have resigned due to the fact that they have insufficient staff to meet the needs of the expanding business. In light of this fact, Zaspa has approached your firm, EA LLP, to take on the audit going forward.

For each EA LLP staff member below, identify any potential threat(s) to independence

EA LLP Staff Member	Threats to independence
Toni Kowalsky, partner. Toni and Zaspa’s CEO, Roger, run a local summer tennis camp together. Toni and Roger became friends when they both worked at Zaspa. Toni left her role as finance VP at Zaspa 18 months ago.
Patrick Sholer, senior manager. Patrick is a big tennis enthusiast and bought Zaspa tennis racquets for himself and his family.
Chris Washolc, manager. Chris worked in Zaspa’s internal audit department on review of payroll system controls, but left Zaspa two years ago
Sam Rivers, audit senior. Sam owns 1000 shares in Zaspa, inherited from his father’s estate.
Yolanda Ladna, audit senior. Yolanda plays on a semi-competitive volleyball team with four Zaspa employees
Anna Madras, audit junior. Anne’s father is a finance VP at Zaspa’s parent company, which is listed on the TSX

Answer 1

Answers : -

1. Ex-staff and partner threat to independence. - these occur when the partner or the staff leave the company and provide service to the former partners or employer.

2. Self-interest threat to independence - the employee or the client only thinks of their own self interest rather than of companies interest.

3. Ex-staff and partner threat to independence - these threat occur when a staff leaves the company and provides service to the former employer.

4. Relationships threat to independence - these occur when there is a relation between the client and company.

5. Relationships threat to independence - these occur when there is a relation between the client and the company.

6. Relationships threat to independence - these occur when there is a relation between the client and the company.