Threat to independent

1. Familiarity threat
EA have been audit partner for the past five years.
An EA independence may impaired reason being the close relationship between them.
These may impaired the judgement on the financial statement

Therefore recommended that rotation of the audit partner to avoid familiarity threat

2. Self Review
EA prepare the financial statement as well as carrying audit could provide a self review threat as they may not seen their error or want to report the errors they have been prepared before.

EA should therefore reject the preparation of financial statement

3. Advocacy Threat (supporting client)
Attending the social event with respect to the listing may be inappropriate as EA may be seen as supporting his client in this venture.
There is a threat of advocacy.
Support the client may seen as the the EA are too close with the client.
Therefore they may lose their independent view regarding the audit.
there is also a threat of familiarity.

EA therefore politely reject the invitation by stated reason.

4. Self interest
Under the ACCAs codes of ethics, the EA should not hold any beneficial shares in the client company.
The provision include the audit staffs involved in the audit as they maybe more interested in value of the shares rather rather then correct opinion of the audit.

The shares should be therefore disposal as soon as possible to prevent any potential independence problem

5. Undue dependence
Unpaid fee in respect of taxation services can constructed as loan to client.
An outstanding loan will affect independence as closure of the loan are seen more important than provide an appropriate audit opinion.

EA may need to discuss the matter with the board suggesting payment made alternatively audit work may need to delay until the fees paid