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You are an audit manager in Messam and Co$,$ a large audit firm which specializes in providing audit and accountancy services to manufacturing companies. Guthrie Co has asked your firm to accept appointment as external auditors. Guthrie Co manufactures sports equipment. Your firm also audits Crow Co another manufacturer of sports equipment and therefore your firm is confident it has the experience to carry out the audit.

You have been asked to take on the role of audit manager for Guthrie Co$,$ should your firm accept the engagement. You own a small number of shares in Guthrie Co$,$ as you used to be an employee of the company Franc Durham, who has been the engagement partner for Crow Co for twelve years, will take the role of engagement partner for Guthrie. The audit senior will be Tom Alexander, as his sister is the financial controller at Guthrie Co$.$ And therefore he knows the business well

Your firm recently purchases some bibs, footballs and other equipment form Guthrie Co for the firm$$s annual football tournament. Murray co has offered to provide this equipment free of charge to the firm if they accept the role as auditor.

Guthrie Co would also like your firm to provide taxation and accounting services. Specifically, the company would like you to prepare the financial statements and represent the company in a dispute with the taxation authorities.

The fees for last year$$s audit of Crow$$s Co have not yet been paid and you have been asked by Franc Durham to look into the matter.

REQUIRED:

Using the information provided, explain the ethical threats which may affect the independence of Messam & Co in respect of the audit of Guthrie Co or Crow Co$,$ and for each threat identify ways in which the threat$($s$)$ might be reduced.

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