(i) Long association threat

Generally 1 mark per comment

– Familiarity threat (½ mark only)
 – Threat more significant for senior personnel
 – Level of threat depends on various factors
 – Lose scepticism
 – Code requires partner rotation for listed clients

Max marks 3

(ii) Compulsory firm rotation

Generally 1 mark per comment

– Eliminates familiarity threat
 – Fresh pair of eyes for audit client
 – Loss of fee income
 – Unwilling to invest – lower quality audit
 – Loss of cumulative knowledge – lower quality audit
 – Increase in cost and audit fee
 – Disruption to client

Max marks 4