PMB Security Ltd has been an audit client of Maitland Partnersfor the past 15 years. PMB Security Ltd, an ASX listed company, isbased in Roma where it manufactures high-tech security systems. PMBSecurity’s end of financial year is 30 June, and Maitland Partnersis preparing to commence the 2019 audit.

Caryn Marks has been the engagement partner on the PMB SecurityLtd’s audit for the past five years. Caryn is a specialist in thesecurity/IT industry and intends to remain as review partner whenthe audit is rotated next year to a new audit partner (ScottTurner, who is to be promoted to partner to enable him to sign-offon the audit).

In September 2018, PMB Security Ltd installed a newoff-the-shelf inventory costing system. This system replaced asystem that had been developed in-house, as the old system could nolonger keep up with the complex and detailed manufacturing costingprocess that provides tender costings. The old system also haddifficulty with the company’s broader reporting requirements.

PMB Security Ltd’s information technology (IT) department,together with the consultants from the software company implementedthe new manufacturing costing system. Key operational staff fromPMB Security Ltd, together with consultants from the softwaresupplier were significantly engaged in the selection, testing,training and implementation stages. Several customizedmodifications were made and therefore PMB Security has askedMaitland Partners to provide an estimate of the valuation of thesoftware system.

PMB Security Ltd has a small internal audit department whichreports to the Chief Financial Officer (CFO), Bruce Tegan, who isan ex-partner of Maitland Partners. Tegan took up the appointmentas CFO for PMB Security Ltd in November 2018, after spending twoyears in early retirement. During his last year at MaitlandPartners, Tegan had been the review partner on the 2016 PMBSecurity Ltd audit. Tegan does not hold any financial interest inMaitland Partners, having been paid out his capital on retirement.Further, Tegan has not remained in contact with any of theremaining partners since his departure from the audit firm, withthe exception of Scott Turner, whom he had mentored in his earlycareer.

Question:

You are required to identify and discuss any issues that couldgive rise to potential threats to independence for MaitlandPartners in their audit of PMB Security Ltd. (Australia)