Question

Mixed Down Electronics Limited is a designer of high technology healthcare equipment. For the current financial year the CFO of Mixed Down Electronics Limited reported the following key account balances: (a) Sales Revenue - $111 million; (b) Gross Profit - $65 million; (c) EBIT - $43 million; (d) NOPAT - $5 million; (e) Total Current Assets - $8 million; (f) Total Net PPE - $60 million; (g) Total Assets - $250 million; (h) Total Current Liabilities - $15 million; (i) Total Interest-Bearing Debt - $185 million; and (j) Total Equity $15 million.

Fazy Auditing Services has been the auditor of Mixed Down Electronics Limited for the past 4 years and were recently reappointed to audit the financial statements for the current financial year.

Required: Consider the following scenarios independently. Determine the type of ethical threat to independence that best describes the situation in each scenario and justification for your answer. Provide your answer in the template:

gives the ethical threat and the justification of the 2 scenarios

1-The audit partner arranged for the audit team responsible for the Mixed Down Electronics Limited to have a team meal together at a high-end restaurant during the start of the audit season. At the meal the senior audit manager mentioned a conversation she had with the CFO of Mixed Down Electronics Limited. The CFO asked if the corporate advisory department of Fazy Auditing Services would speak on behalf of Mixed Down Electronics Limited at coming meetings of the Stock Exchange Regulatory Committee.

2-At a corporate golfing event, the CEO and CFO of Mixed Down Electronics Limited were partnered with the audit partner of Fazy Auditing Services. Whilst on the 10th hole the CEO of Mixed Down Electronics Limited remarked; “Please thank the tax and corporate advisory partners of your firm for providing guarantees on two large low interest loans we got from Fazy Auditing Services. The loans will really assist in expanding our business and provide more work for your audit team.” The audit partner thought this great news as the audit team had just commenced it audit of Mixed Down Electronics Limited for the current year.